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Government size, institutions, and export performance among OECD economies

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  • Bournakis, Ioannis
  • Tsoukis, Christopher

Abstract

With a panel of 18 OECD countries, 1980–2005, we investigate the determinants of export performance, in particular the effects of the size of government and institutional features. In a model of endogenous extent of domestically-produced goods, government size has a non-linear effect on export performance; the export-maximising size of government (tax receipts) is around 40–45% of GDP; the best size of productive government spending is around 16% of GDP. Product market and labour market-related rigidities affect negatively the export performance both on their own and via a negative effect on the effectiveness of R&D and slow down the speed of adjustment. Among traditional variables, relative unit labour cost, R&D shares in GDP, TFP growth and human capital show up significantly and with the expected signs.

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  • Bournakis, Ioannis & Tsoukis, Christopher, 2016. "Government size, institutions, and export performance among OECD economies," Economic Modelling, Elsevier, vol. 53(C), pages 37-47.
    • Handle: RePEc:eee:ecmode:v:53:y:2016:i:c:p:37-47
    DOI: 10.1016/j.econmod.2015.11.011
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    More about this item

    Keywords

    Export shares; Government size; Institutions; Unit labour cost; Competitiveness;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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