Trade openness and bigger governments: The role of country size revisited

Michael Jetter and Christopher Parmeter

European Journal of Political Economy, 2015, vol. 37, issue C, 49-63

Abstract: This paper revisits the question of why more open countries tend to have bigger governments. We replicate successfully the main results of Ram (2009), who rejects the role of country size as an omitted variable. However, several extensions advise against a hasty conclusion: The results differ substantially depending on the data source used, the timeframe considered, the countries selected, and the way variables are measured. Specifically, we employ newer versions of the Penn World Table (PWT 7.1 and 8.0), allowing us to both extend the number of observations and the timeframe. We find evidence for the claim that smaller countries do indeed have bigger governments, especially when using the PWT 8.0 data, and Ram (2009) findings might be driven by the specific dataset used (PWT 6.1) and the countries included in that sample. Finally, we also conduct quantile regression analyses to pin down at which point of the distribution the suggested relationships come out.

Keywords: Government size; Trade openness; Country size; Panel data; Penn world table (search for similar items in EconPapers)
JEL-codes: C21 C23 H10 H50 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:37:y:2015:i:c:p:49-63

DOI: 10.1016/j.ejpoleco.2014.11.001

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