Relative government size in globalization and its welfare implications

Yong-Yil Choi

Applied Economics, 2010, vol. 42, issue 11, 1447-1453

Abstract: As globalization spreads across the world, countries are experiencing growing competitive pressure in many fields. Since the role of government is needed to change in this global era, the so-called government-size debate has become fierce. This article provides a measure of relative government size in globalization, and clarifies the welfare effect of relative government size in globalization applying a simplified dynamic utility theoretical approach. The main finding is that there is no systematic relationship between relative government size and relative welfare in globalization; such relation depends on behavioural parameters such as the elasticity of inter-temporal substitution of consumption and the disutility of labour. This result suggests that finding prerequisites for government consumption to play a welfare-improving role in globalization is more beneficial than the government-size debate.

Date: 2010
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DOI: 10.1080/00036840701721430

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