Trade Openness, Gains from Variety and Government Spending

Sandra Hanslin Grossmann ()

No 1004, SOI - Working Papers from Socioeconomic Institute - University of Zurich

Abstract: This paper investigates empirically the effect of import diversity on government size and provides evidence for the love of variety effect on government spending described in Hanslin (2008). I argue that crowding out of firms is an important cost of public good provision. However, due to the access to foreign varieties, national costs of public good provision are lower and therefore, public good provision is higher. Especially for OECD countries this channel seems to exist. The diversity of imported products has a positive effect on government consumption, particularly when these goods are classified as differentiated. In addition, this positive effect is decreasing in home market size. Further, the direct effect of the share of differentiated in total imported products on the government share is negative.

Keywords: education; schooling; Switzerland (search for similar items in EconPapers)
JEL-codes: I21 J62 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2010-04
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (3)

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https://www.zora.uzh.ch/id/eprint/51788/1/wp1004.pdf First version, 2010 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:soz:wpaper:1004

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