Why Do Open Economies Have Bigger Governments?
Posted: 10 Nov 1998
Abstract
There exists a positive correlation between an economy's exposure to international trade and the size of its government. The correlation holds for most measures of government spending, in low- as well as high-income samples, and is robust to the inclusion of a wide range of controls. One explanation is that government spending plays a risk-reducing role in economies exposed to a significant amount of external risk. The paper provides a range of evidence consistent with this hypothesis. In particular, the relationship between openness and government size is strongest when terms-of-trade risk is highest.
JEL Classification: H11, H50
Suggested Citation: Suggested Citation
Rodrik, Dani, Why Do Open Economies Have Bigger Governments?. Available at SSRN: https://ssrn.com/abstract=129128
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.