Abstract
In the literature on the effects of economic globalisation, the compensation hypothesis predicts a positive relationship between trade openness and the size of the public sector, as governments perform a risk mitigating role in the face of internationally generated risk and economic dislocations. Statistically, support for the compensation hypothesis should entail a positive causality running from trade-openness to government size. We use time series data - for 23 industrialised OECD countries over the 1948-1998 period - to test this hypothesis within the framework proposed by Sims and Granger. Our findings fail to provide overwhelming support for it.
| Original language | English |
|---|---|
| Publisher | University of Dundee |
| Publication status | Published - 2004 |
Publication series
| Name | Dundee Discussion Papers in Economics |
|---|---|
| Publisher | University of Dundee |
| No. | 164 |
| ISSN (Print) | 1473-236X |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 8 Decent Work and Economic Growth
Keywords
- Globalisation
- Trade-openness
- Government size
- Welfare state
- Causality
- Cointegration
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