trade openness investment instability and terms of trade volatility abstract in the presence of economies of scale in the investment technology trade openness may have non conventional effects on the level of investment its cyclical behavior and the volatility of the terms of trade trade openness may lead to boom bust cycles of investment supported by self fulfilling expectations the economy may oscillate between optimistic expectations good terms of trade and investment boom to pessimistic expectations bad terms of trade and investment bust we also suggest that the likelihood of such oscillations is higher for developing than for developed economies because the former may typically incur higher setup costs of investment this phenomenon may help to explain the excessive volatility of the terms of trade of developing countries relative to industrial countries

an analysis of government expenditure and trade liberalization the effect of trade liberalization on government s role in the economy is investigated it is shown that contrary to received expectations as small open economies liberalize their trade the size of government decreases

the long run relationship between openness and government size evidence from bounds test the bounds test is applied to determine the existence of a level relationship between government size openness terms of trade volatility and external risk using time series data from australia canada england norway sweden and the usa bounds test results show that the existence of a long run relationship in the usa and canada but not in any of the other countries long run parameters are estimated using both autoregressive distributed lag and fm ols procedures results vary from country to country with some evidence that government size is significantly affected by openness and terms of trade volatility however contrary to argument and evidence developed using cross section data empirical evidence presented in this paper show that the size of the government has not changed to mitigate the effect of increased income risks associated with greater openness

labor economics problems in analyzing labor markets introduction i unemployment 1 keynes cambridge and the new keynesian economics m s lawlor 2 labor economics and unemployment an historian s perspective a keyssar ii how labor markets really work 3 the impact of formal on the job training on unemployment and the influence of gender race and working life cycle position on accessibility to on the job training a j field a h goldsmith 4 empirical tests of labor market equilibrium an evaluation j heckman t macurdy 5 labor market segmentation theory reconsidering the evidence w t dickens k lang iii race discrimination and competition 6 labor markets and racial inequality j cotton 7 racial inequality and racial conflict recent developments in radical theory r williams iv culture ethnicity and poverty 8 culture and human capital theory and evidence or theory versus evidence s a woodbury 9 labor economics and public policy dominance of constraints on preferences m foster index

public debt overhangs advanced economy episodes since 1800 exceeds 90 percent of nominal gdp on a sustained basis such public debt overhang episodes are associated with lower growth than during other periods even more episodes are associated with lower growth than during other periods even more striking among the 26 episodes we identify 20 lasted more than a decade the long striking among the 26 episodes we identify 20 lasted more than a decade the long duration belies the view that the correlation is caused mainly by debt buildups during duration belies the view that the correlation is caused mainly by debt buildups during business cycle recessions the long duration also implies that the cumulative shortfall business cycle recessions the long duration also implies that the cumulative shortfall in output from debt overhang is potentially massive these growth reducing effects of in output from debt overhang is potentially massive these growth reducing effects of high public debt are apparently not transmitted exclusively through high real interest high public debt are apparently not transmitted exclusively through high real interest rates in that in eleven of the episodes interest rates are not materially higher rates in that in eleven of the episodes interest rates are not materially higher

does globalization affect growth evidence from a new index of globalization the study develops an index of globalization covering its three main dimensions economic integration social integration and political integration using panel data for 123 countries in 1970 2000 it is analysed empirically whether the overall index of globalization as well as sub indexes constructed to measure the single dimensions affect economic growth as the results show globalization indeed promotes growth the dimensions most robustly related with growth refer to actual economic flows and restrictions in developed countries although less robustly information flows also promote growth whereas political integration has no effect

government size government debt and globalization this article empirically investigates the effect of globalization on government size and debt using panel heterogeneous cointegration techniques to a panel of developing and developed countries i

the welfare state and competitiveness in all industrial countries fiscal policy is increasingly about redistribution in this paper the authors study redistribution across different types of agents in a world characterized by the presence of labor unions and distortionary taxation they show that an increase in transfers financed by distortionary taxation has nonlinear effects on unit labor costs relative to the other countries depending on the degree of centralization of the wage setting process in the labor market the authors find considerable empirical support for the model in a sample of fourteen oecd countries copyright 1997 by american economic association

globalisation and government spending evidence for the hyper globalisation of the 1990s and 2000s in this paper we provide an up to date empirical assessment of the relationship between economic globalisation and government spending for the hyper globalisation period of the 1990s and 2000s we use data on government consumption spending and more disaggregated spending components e g social welfare we also use a range of globalisation measures including the most recent version of the kof globalisation index and a combination of econometric methods including fixed effects and instrumental variable iv estimation the results suggest that hyper globalisation has had divergent and conflicting effects on consumption spending while de jure trade globalisation has tended to raise spending de jure financial globalisation has tended to reduce it we also find evidence that the positive effect of de facto trade globalisation on spending weakened significantly during the 1990s and 2000s in comparison with earlier decades these effects could have contributed to the growing political backlash witnessed against globalisation since the early 2000s

do more open economies have bigger governments another look abstract we reconsider the evidence of a positive relationship between openness and the size of government recently established by rodrik rodrik d 1998 why do more open economies have bigger governments journal of political economy 106 997 1032 and others while the existing literature focuses on expenditure based measures of government we consider non budgetary measures such as government ownership of enterprises price controls asset expropriation each of these may have little impact on government expenditures yet can make the role of government sizable we demonstrate that the scope of government is much larger in less open economies when considering non budgetary measures additionally we show that higher levels of non budgetary government are positively correlated with trade barriers finally we provide further evidence on the hypothesis that larger governments provide social insurance in open economies subject to terms of trade shocks although we find that greater terms of trade risk is weakly associated with larger government in all forms these interventions include price controls and greater risk of asset expropriation which are hard to reconcile with a pure insurance motive

openness country size and government size additional evidence from a large cross country panel abstract a body of influential research has suggested that there is a negative association between country size and government size and between country size and openness and these may account for the positive association between openness and government size estimation of several models from 41 year panel data for over 150 countries indicates that while pooled ols estimates support the foregoing scenario when cross country heterogeneity is taken into consideration through the fixed effects format there is little evidence of a negative association of country size with either government size or openness therefore it does not seem likely that positive association between openness and government size arises due to the mediating role of country size

the politics of 1992 fiscal policy and european integration the internal market in europe will greatly increase the international mobility of resources how will this affect fiscal policy in different countries we consider taxation of capital in a two country model where a democratically chosen government in each country chooses tax policy higher capital mobility changes the politico economic equilibrium in two ways on the one hand it leads to more tax competition between the countries this economic effect tends to lower tax rates in both countries on the other hand it alters voters preferences and makes them elect a different government this political effect offsets the increased tax competition although not completely

financial globalization inequality and the rising public debt abstract during the last three decades government debt has increased in most developed countries during the same period we have also observed a significant liberalization of international financial markets we propose a multicountry model with incomplete markets and show that governments may choose higher levels of debt when financial markets become internationally integrated we also show that public debt increases with the volatility of uninsurable income idiosyncratic risk to the extent that the increase in income inequality observed in some industrialized countries has been associated with higher idiosyncratic risk the paper suggests another potential mechanism for the rise in public debt jel d31 e62 f65 h63

the impact of high government debt on economic growth and its channels an empirical investigation for the euro area abstract this paper investigates the average impact of government debt on per capita gdp growth in twelve euro area countries over a period of about 40 years starting in 1970 it finds a non linear impact of debt on growth with a turning point beyond which the government debt to gdp ratio has a negative impact on long term growth at about 90 100 of gdp confidence intervals for the debt turning point suggest that the negative growth effect of high debt may start already from levels of around 70 to 80 of gdp the channels through which government debt is found to have a non linear impact on the economic growth rate are private saving public investment and total factor productivity

ethnicity race and earnings abstract utilizing the 1980 and 1990 usa censuses and blinder oaxaca decompositions we examine the extent of discrimination across women and men by ancestry and race the charge that blinder oaxaca decompositions indicate cultural rather than discriminatory differentials is addressed with two futher experiments one that controls for color and varies culture and one that controls for culture and varies color

trade openness and government size abstract we examine whether trade openness influences government size using panel data we find no evidence of a positive relationship rather causality tests show that larger government size leads to lower openness the opposite of what rodrik rodrik dani 1998 why do more open economies have bigger governments journal of political economy 106 997 1032 hypothesized

openness country size and government abstract this paper shows that smaller countries have a larger share of public consumption in gdp and are also more open to trade these empirical observations are consistent with recent theoretical models explaining country formation and break up and may account for the observed positive empirical relationship between trade openness and government size

openness government size and the terms of trade this paper investigates the relationship between trade openness and the size ofngovernments both theoretically and empirically we argue that openness can increase the size of governments through two channels 1 a terms of trade externality whereby trade lowers the domestic cost of taxation and 2 the demand for insurance whereby trade raises risk and public transfers we provide a unified framework for studying and testing these two mechanisms our main theoretical prediction is that the relative strength of the two explanations depends on a key parameter namely the elasticity of substitution between domestic and foreign goods moreover while the first mechanism is inefficient from the standpoint of world welfare the second is instead optimal in the empirical part of the paper we provide new evidence on the positive association between openness and government size and we explore its determinants consistently with the terms of trade externality channel we show that the correlation is contingent on a low elasticity of substitution between domestic and foreign goods our findings raise warnings that globalization may have led to inefficiently large governments

the effects of capital mobility trade openness and democracy on social spending in latin america 1980 1999 empirical studies measuring the impact of globalization on social spending have appeared recently in leading journals this study seeks to improve upon previous work by 1 employing a more sophisticated and comprehensive measure of financial openness 2 using a more accurate measure of trade openness based on purchasing power parities and 3 relying on social spending data that are more complete than those used by previous studies on latin america our estimates suggest that several empirical patterns reported in previous work deserve a second look we find that trade openness has a positive association with education and social security expenditures that financial openness does not constrain government outlays for social programs and that democracy has a strong positive association with social spending particularly on items that bolster human capital formation t he international integration of markets for goods and services over the past two decades is unprecedented amidst a broader context of international integration latin america has experienced the most dramatic change in its economic policy orientation since world war ii few regions have undergone as rapid and thorough an economic transformation how has economic integration affected the social welfare policies of latin american governments has it forced them to reduce spending on social programs in order to compete in the world economy or has it induced them to provide social safety nets for those hurt by economic competition has democratization in latin america compelled governments to spend more on social programs in relatively open economies

globalization domestic politics and social spending in latin america a time series cross section analysis 1973 97 this study examines the effects of globalization democratization and partisanship on social spending in fourteen latin american countries from 1973 to 1997 using a pooled time series error correction model the authors examine three sets of issues first following debates in the literature on oecd countries they want to know whether social spending has been encouraged or constrained by integration into global markets within this context they examine the extent to which such outcomes might be influenced by two additional sets of domestic political and institutional factors discussed in work on developed countries the electoral pressures of democratic institutions and whether or not popularly based governments are in power the authors show that trade integration has a consistently negative effect on aggregate social spending and that this is compounded by openness to capital markets this is the strongest and most robust finding in the study neither democratic nor popularly based governments consistently affect overall social spending the authors then disaggregate spending into social security transfers and expenditures on health and education they find that popularly based governments tend to protect social security transfers which tend to flow disproportionately to their unionized constituencies but they have a negative impact on health and education spending conversely a shift to democracy leads to increases in health and education spending which reaches a larger segment of the population the authors conclude by emphasizing the contrasting political logics of the different types of social spending

an optimal taxation approach to fiscal federalism in a federal system of government each unit of government decides independently how much of each type of public good to provide and what types of taxes and which tax rates to use in funding the public goods in this paper we explore what types of problems can arise from this decentralized form of decision making in particular we describe systematically the types of externalities that one unit of government can create for nonresidents through both its public goods decisions and its taxation decisions the paper also explores briefly what the central government might do to lessen the costs of decentralized decision making

public debt and growth heterogeneity and non linearity we study the long run relationship between public debt and growth in a large panel of countries our analysis builds on theoretical arguments and data considerations in modelling the debt growth relationship as heterogeneous across countries we investigate the debt growth nexus adopting linear and non linear specifications employing novel methods and diagnostics from the time series literature adapted for use in the panel we find some support for a negative relationship between public debt and long run growth across countries but no evidence for a similar let alone common debt threshold within countries

how does trade openness influence budget deficits in developing countries abstract this paper analyses the effects of trade openness on budget balances by distinguishing the effects of natural openness from those of trade policy revealed indicators of natural openness and trade policy are computed using gmm system estimator the econometric analysis focuses on 66 developing countries over 1974 98 the results show that trade openness increases a country s exposure to external shocks this enforces the negative impact on budget balances of terms of trade instability additionally trade openness influences budget balances through several other channels corruption income inequalities etc then natural openness and trade policy have opposite effects the former deteriorates budget balances whereas the latter enhances them

trade capital mobility and tax competition this paper examines a system of governments national state or local that finance public expenditures with taxes on mobile capital e g a property tax unlike previous research on tax competition explicit consideration is given to the general equilibrium determination of the prices at which goods are traded between regions the analysis identifies inefficiencies in government behavior that are not apparent in models in which the terms of trade are exogenously given capital taxation is shown to create an inefficient distribution of public good outputs across regions accompanied by an inefficient pattern of trade a model is presented in which the chosen levels of public good outputs differ across regions containing identical residents and production possibilities there is a wasteful diversity of public good supplies

globalization and the decline of the welfare state in less developed countries why have trends in government welfare spending in developing countries diverged from those in developed countries i address this question by investigating the effects of capital and trade flows on government welfare spending in fifty three developing countries using an original measure of labor power in developing countries i test the links between international markets labor s political strength and the welfare state i argue that labor s collective action problems caused by large populations of low skilled and surplus workers offset labor s potential political gains from globalization i show that when the proportion of low skilled workers in a nation is high globalization will lead to a decline in welfare spending most significantly the results suggest that in nations where labor market institutions are not yet well developed government social welfare spending is constrained by international market forces

government size and growth accounting for economic freedom and globalization we examine the relationship between government size and economic growth controlling for economic freedom and globalization and using bayesian averaging over classical estimates in a panel of rich countries

government size and growth a survey and interpretation of the evidence the literature on the relationship between the size of government and economic growth is full of seemingly contradictory findings this conflict is largely explained by variations in definitions and the countries studied an alternative approach of limiting the focus to studies of the relationship in rich countries measuring government size as total taxes or total expenditure relative to gdp and relying on panel data estimations with variation over time reveals a more consistent picture the most recent studies find a significant negative correlation an increase in government size by 10 percentage points is associated with a 0 5 to 1 percent lower annual growth rate we discuss efforts to make sense of this correlation and note several pitfalls involved in giving it a causal interpretation against this background we discuss two explanations of why several countries with high taxes seem able to enjoy above average growth one hypothesis is that countries with higher social trust levels are able to develop larger government sectors without harming the economy another explanation is that countries with large governments compensate for high taxes and spending by implementing market friendly policies in other areas both explanations are supported by ongoing research

maintaining a reputation when strategies are imperfectly observed this paper studies reputation effects in games with a single long run player whose choice of stage game strategy is imperfectly observed by his opponents we obtain lower and upper bounds on the long run player s payoff in any nash equilibrium of the game if the long run player s stage game strategy is statistically identified by the observed outcomes then for generic payoffs the upper and lower bounds both converge as the discount factor tends to 1 to the long run player s stackelberg payoff which is the most he could obtain by publicly committing himself to any strategy