The effect of trade openness on optimal government size under endogenous firm entry

Sandra Hanslin Grossmann ()

No 802, SOI - Working Papers from Socioeconomic Institute - University of Zurich

Abstract: This paper analyzes the effect of trade liberalization on government spending in a general equilibrium model with a continuum of industries supplying tradable and nontradable goods under monopolistic competition. Trade liberalization is modeled as the opening up of product markets between two countries, which may differ in total factor productivity, factor endowment and fix cost technology. In this setup, I show that the optimal provision of a public consumption good depends positively on the degree of openness. Moreover, the richer and more productive country chooses a lower optimal government share.

Keywords: international trade; monopolistic competition; trade openness; public expenditure (search for similar items in EconPapers)
JEL-codes: F12 F15 H40 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2008-03
New Economics Papers: this item is included in nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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https://www.zora.uzh.ch/id/eprint/52390/1/wp0802.pdf First version, 2008 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:soz:wpaper:0802

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