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Trade openness, capital openness and government size

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  • Liberati, Paolo

Abstract

This paper provides empirical evidence of the relation between trade openness, capital openness and government expenditures in a cross sectional time-series context. It is shown that capital openness is significantly and negatively related to government expenditures in line with the conventional wisdom that capital mobility may undermine the ability of governments to maintain larger public sectors. More importantly, the compensation hypothesis originally proposed by Rodrik (1998) and traceable back to Cameron (1978) is not in general supported by the data.

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  • Liberati, Paolo, 2007. "Trade openness, capital openness and government size," MPRA Paper 44371, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:44371
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    More about this item

    Keywords

    Government Size; Openness; Compensation hypothesis;
    All these keywords.

    JEL classification:

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

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