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Trade openness and government size of small developing countries

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  • Faqin Lin
  • Bing Li
  • Nicholas C. S. Sim

Abstract

type="main" xml:id="ecot12053-abs-0001" xml:lang="en"> This paper examines the causal effect that trade openness has on government size in small developing countries (SDCs). We use the construction of the trade cost variables based on Baltic Dry Index in primary goods as instruments of trade openness to address the endogeneity issue. We find that the increase in trade openness leads to an increase in government size: a 1 percent expansion in trade openness (trade GDP ratio) raises government consumption over GDP ratio by approximately 0.1–0.2 percentage points on average. Its quantitative significance emphasizes the importance of rethinking the costs and benefits of trade openness for SDCs.

Suggested Citation

  • Faqin Lin & Bing Li & Nicholas C. S. Sim, 2014. "Trade openness and government size of small developing countries," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 22(4), pages 783-808, October.
    • Handle: RePEc:bla:etrans:v:22:y:2014:i:4:p:783-808
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    File URL: http://hdl.handle.net/10.1111/ecot.2014.22.issue-4
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    Cited by:

    1. Ahmet Tekin & İbrahim Tuğrul Çınar & Ersin Nail Sağdıç & Fazlı Yıldız, 2023. "Trade Openness and Sustainable Government Size: Evidence from Central and Eastern European Countries," Sustainability, MDPI, vol. 15(15), pages 1-17, August.
    2. Noumba, Issidor & Nguea, Stéphane Mbiankeu, 2023. "Assessing the role of globalization for universal electricity access," International Economics, Elsevier, vol. 174(C), pages 180-195.
    3. Helder Ferreira de Mendonça & Ana Jordânia de Oliveira, 2019. "Openness and government size: A new empirical assessment," Economics Bulletin, AccessEcon, vol. 39(2), pages 982-995.
    4. Kolawole Opeyemi OLAWOLE & Temidayo Oyeyemi ADEBAYO, 2018. "Openness and government size: The compensation and efficiency hypotheses considered for Nigeria," E3 Journal of Business Management and Economics., E3 Journals, vol. 9(1), pages 012-021.
    5. Stéphane Mbiankeu Nguea, 2020. "Openness and Government Size in Sub-Saharan African countries," Economics Bulletin, AccessEcon, vol. 40(4), pages 2669-2676.
    6. Fotio, Hervé Kaffo & Nguea, Stéphane Mbiankeu, 2022. "Access to water and sanitation in Africa: Does globalization matter?," International Economics, Elsevier, vol. 170(C), pages 79-91.
    7. Olawole, Kolawole & Adebayo, Temidayo, 2017. "Openness and Government Size:The Compensation and Efficiency Hypotheses Considered for Nigeria," MPRA Paper 82022, University Library of Munich, Germany.
    8. Erkam Sari & Hakan Hotunluoglu, 2021. "Government Size and Openness: Insights Basedon Country Classifications," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 7(1), pages 1-16, June.

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