The Relation between Openness and Government Size

Akbarian, Reza; Karkon, Mohamad

Document Type : Research Paper

Authors

Reza Akbarian ¹
Mohamad Karkon ²

¹ Associate Professor, Economics Department, Shiraz University

² M.A in Economics, Shiraz University

Abstract

Based on the debates on the impacts of globalization on government size, efficiency hypothesis and compensation hypothesis are two measure of globalization. The compensation hypothesis predicts that governments perform a risk-mitigating role against internationally generated risk and economic dislocations. Under efficiency hypothesis, governments compete to attract capital, and this competition will result in decreasing government presence in economy. In this paper we try to investigate the reason of government enlargement in Iran. We use trade openness (as globalization index), real income per capita, inflation, population, oil income and government size (based on government expenditure) and consumption expenditure in the form of percentage of GDP. An Autoregressive Distributed Lags (ARDL) model) is developed for this study based on Bounds Testing (Pesaran, et.al, 2001). The result of this model shows that in the long run trade openness has no effect on government size but there is a significant relation between them in short run. Furthermore, the relation between globalization and social welfare and security shows that these expenditures didn’t compensate the effect of shock resulted from trade openness. In this way, the oil income has created a great income reserves for government which make government enlarge more.

Keywords

References

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Economics Research

The Relation between Openness and Government Size

References

References

Volume 13, Issue 48 - Serial Number 1
April 2013
Pages 79-107

The Relation between Openness and Government Size

References

References

Volume 13, Issue 48 - Serial Number 1April 2013Pages 79-107

Volume 13, Issue 48 - Serial Number 1
April 2013
Pages 79-107