Trade openness, capital openness and government size

Liberati, Paolo (2007): Trade openness, capital openness and government size. Published in: Journal of Public Policy , Vol. 2, No. 27 (2007): pp. 215-247.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Government Size, Openness, Compensation hypothesis
• Subjects: H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government; H - Public Economics > H5 - National Government Expenditures and Related Policies > H50 - General; H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H77 - Intergovernmental Relations ; Federalism ; Secession

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