Varieties of capitalism, governance and government spending: A cross-section analysis

Joachim Ahrens, Rainer Schweickert and Juliane Zenker

No 1726, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: We argue that the literature on government size suffers from neglecting the role of governance both as a driving and a limiting factor for government spending. Cross-country evidence for a sample of 126 developed and developing countries averaging data for the period 2003-07 reveals that better governance allows for higher spending. However, on the demand side, more open countries are likely to spend more in cases of minor quality of governance only. In this respect, government spending compensates ineffective institutional structures. More generally, a preference for a coordinated (continental European type) market economy leads to higher levels of spending if accompanied by better governance. While most developing countries share these preferences, Latin American countries seem to prefer a lower level of spending as in liberal (anglo-saxon) market economies.

Keywords: Government Size; Governance; Varieties of Capitalism; OECD; Developing Countries (search for similar items in EconPapers)
JEL-codes: H10 P10 P51 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Varieties of capitalism, governance and government spending: A cross-section analysis (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1726

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