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Government Size and Trade Openness: Some Additional Insights

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  • Paolo Liberati

Abstract

This paper provides additional insights on the relationship between government size and trade openness using a panel of countries drawn from the World Development Indicators and the Penn World Tables 7.0 from 1962 to 2009. It is shown that the compensation hypothesis proposed by Rodrik (1998) and revisited by Alesina and Wacziarg (1998) and by Ram (2009) cannot be attributed general validity. On the one hand, it is shown that country size is not relevant to determine the sign of the relationship between government size and economic openness, contradicting previous results by Alesina and Wacziarg (1998). On the other hand, the relevance of the cross-country heterogeneity suggested by Ram (2009) to argue in favour of the compensation hypothesis only picks the characteristic of the African countries of being relatively more closed.

Suggested Citation

  • Paolo Liberati, 2013. "Government Size and Trade Openness: Some Additional Insights," Research in World Economy, Research in World Economy, Sciedu Press, vol. 4(2), pages 12-17, September.
    • Handle: RePEc:jfr:rwe111:v:4:y:2013:i:2:p:12-17
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    References listed on IDEAS

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    1. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
    2. Alena Kimakova, 2009. "Government size and openness revisited: the case of financial globalization," Kyklos, Wiley Blackwell, vol. 62(3), pages 394-406, August.
    3. Francesca Gastaldi & Paolo Liberati, 2011. "Economic integration and government size: a review of the empirical literature," Financial Theory and Practice, Institute of Public Finance, vol. 35(3), pages 327-384.
    4. Ram, Rati, 2009. "Openness, country size, and government size: Additional evidence from a large cross-country panel," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 213-218, February.
    5. Alesina, Alberto & Wacziarg, Romain, 1998. "Openness, country size and government," Journal of Public Economics, Elsevier, vol. 69(3), pages 305-321, September.
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    Cited by:

    1. Giuranno, Michele G. & Nocco, Antonella, 2020. "Trade tariff, wage gap and public spending," Economic Modelling, Elsevier, vol. 91(C), pages 167-179.
    2. Bismillah & Shahnawaz Malik & Muhammad Ramzan Sheikh, 2022. "Trade Liberalization And Fiscal Stance In Selected Developing Countries: A Granger Causality Approach In Var Framework," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 11(2), pages 134-159, June.
    3. Arzoo Mushtaq & Shahnawaz Malik & Muhammad Hanif Akhtar, 2022. "Nonlinear Taylor Rule And Inflation-Targeting In Pakistan: A Time Series Analysis," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 11(2), pages 185-197, June.
    4. María Franco Chuaire & Carlos Scartascini & Mariano Tommasi, 2017. "State capacity and the quality of policies. Revisiting the relationship between openness and government size," Economics and Politics, Wiley Blackwell, vol. 29(2), pages 133-156, July.
    5. 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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    More about this item

    Keywords

    openness; government size; compensation hypothesis; government consumption; trade;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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