Do government spending and cross-border barriers move together? No long-term relationship in 20 oecd countries, 1970-2009

Federico Podestà

Stato e mercato, 2020, issue 1, 151-182

Abstract: The current debate on globalisation has rarely regarded the combinationbetween government spending and cross-border barriers as a response to thepolitical complications due to international market exposure. Accordingly, this articlewonders whether those policies in affluent democracies have maintained a long-termrelationship over recent decades. Two hypotheses are contrasted. The first one assumesthat these policies are combined to achieve a protective balance able to address thepolitical cleavages deriving from globalization. The persistent necessity to renew thatbalance implies that government intervention and cross-border barriers move togetherin the long run. The second hypothesis assumes that, although both policies underscrutiny can be adopted to protect the groups most damaged by global markets, theydo not move together. This is essentially because the decision-making of these twoprotective solutions are too distant to construct and restore any protective balance.In order to test the two hypotheses, a battery of cointegration tests was estimatedon a panel dataset composed of 20 OECD countries observed over the 1970-2009period. These tests clearly indicate that government spending and cross-border barriersare not cointegrated and do not track together over time.

Keywords: H53 - Government Expenditures and Welfare Programs; F13 - Trade Policy - International Trade Organizations; F38 - International Financial Policy: Financial Transactions Tax; Capital Controls; C33 - Panel Data Models - Spatiotemporal Models. (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:mul:jl9ury:doi:10.1425/97513:y:2020:i:1:p:151-182

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