Government Size, Institutions, and Export Performance among OECD Economies

Bournakis, Ioannis and Tsoukis, Christopher (2015): Government Size, Institutions, and Export Performance among OECD Economies. Forthcoming in: Economic Modelling

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Export shares, government size, institutions, unit labour cost, competitiveness
• Subjects: E - Macroeconomics and Monetary Economics > E0 - General > E02 - Institutions and the Macroeconomy; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics

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