Trade openness and bigger governments: The role of country size revisited

Michael Jetter, Christopher F. Parmeter

Research output: Contribution to journalArticle

12 Scopus citations

Abstract

This paper revisits the question of why more open countries tend to have bigger governments. We replicate successfully the main results of Ram (2009), who rejects the role of country size as an omitted variable. However, several extensions advise against a hasty conclusion: The results differ substantially depending on the data source used, the timeframe considered, the countries selected, and the way variables are measured. Specifically, we employ newer versions of the Penn World Table (PWT 7.1 and 8.0), allowing us to both extend the number of observations and the timeframe. We find evidence for the claim that smaller countries do indeed have bigger governments, especially when using the PWT 8.0 data, and Ram (2009) findings might be driven by the specific dataset used (PWT 6.1) and the countries included in that sample. Finally, we also conduct quantile regression analyses to pin down at which point of the distribution the suggested relationships come out.

Original languageEnglish (US)
Pages (from-to)49-63
Number of pages15
JournalEuropean Journal of Political Economy
Volume37
DOIs
StatePublished - Mar 1 2015

Keywords

  • Country size
  • Government size
  • Panel data
  • Penn world table
  • Trade openness

ASJC Scopus subject areas

  • Economics and Econometrics
  • Political Science and International Relations

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