Investigation of the Relation between Economic Globalization and Government Size in Asian Developing Countries

Document Type: Original Research

Authors

1 Associate Professor in Economics, Yazd University, Yazd, Iran

2 Ph.D student in Economics, Yazd University, Yazd, Iran

3 Faculty of Velayat University, Iranshahr, Iran

Abstract

The purpose of this paper is to examine the relation between government size and openness for a 26-years panel of 30 Asian developing countries. It is argued that there is a negative relation between country size and government size and also between country size and openness. Considering that, some researchers concluded that there is a positive relationship between openness and the size of government. To reveal the relation between these two variables, we used two proxies for measuring the extent of openness. The proxy used for openness is the economic dimension of KOF index of globalization. Employing a non-stationary panel data technique and DOLS estimator, the results show that there is a positive relationship between economic globalization and government size.

Keywords


Alesina, A, and Wacziarg, R (1998). Openness, country size and government. Journal of Public Economics 69(3): 305-321.
Baltagi, B. H., (2005), Econometric Analysis of Panel Data, John Wiley & Sons Ltd, Third Edition.
Baltagi, B. H., Kao, C. (2000), Nonstationary panels, cointegration in panels and dynamic panels: A survey, Advances in Econometrics, Vol. 15, PP. 7–51.
Benarroch, M and Pendy,M (2012). The relationship between trade openness and government size: Does disaggregating government expenditure matter?, Journal of Macroeconomics, No.34:239-252.
Breitung, J., The local power of some unit root tests for panel data, Advances in Econometrics, Vol. 15, PP. 161–177, 2000.

Dahmarde, N and Mahmoodi, E (2012).The effect of economic globalization on inflation in 15 OECD countries, international journal of basic science and applied research, 2(5): 545-550

Falahati, A., & Sepahban Gharebaba, A. (2009). Effects of trade and financial liberalization on government size (a case-study: Iran), International economy studies, Twentieth year, No 2:61-74.
Greene, W.H, Econometric Analysis, Prentice Hall, Fifth Edition, 2003.
Hanslin, S (2008). The effect of trade openness on optimal government size under endogenous firm entry. Working paper, No.0802.
Im KS, Pesaran MH, Shin Y, (2003). Testing for unit roots in heterogeneous panels, Journal of Econometrics. 115(1): 53-74.
Jafari Samimi,A, Ghaderi, S, Hossein zaded,R and Nademi, y, (2012), Openness and Inflation: New Empirical Panel Data Evidence, Economics Letters, Vol. 117, pp. 573-577, 2012.
Jiang, M. (2013). On openness, Government size, factors intensities. University of California.
Joshi, R,M (2009) International Business, Oxford University Press, New Delhi and New York.
Liberti, P. (2007). Trade openness, Capital openness and Government Size. Journal of Public Policy, 27:215-247.
Maddala, GS., Wu, S. (1999). A comparative study of unit root tests with panel data and a new simple test, Oxford Bulletin of Economics and Statistics. 61: 631-652.
Pedroni P, (1999). Critical values for co-integration tests in heterogeneous panels with multiple regressors, Oxford Bulletin of Economics and Statistics. 61: 653-678.
Pedroni P, 2004. Panel cointegration: asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric Theory. 20: 597-625.
Ram, R (2009). Openness, Country size and government size: Additional evidence from large cross- country panel. Journal of Public Economics, 93:214-218.
Rodrik, D. (1998). Why do more open countries have bigger government, Journal of Political Economy, Vol.106, No.5.
Sanz, I and Velazquez, F. (2003), Does Globalization increase government size? An analysis of the effects of foreign direct investment on total government expenditures and its components, Europian Economy Group.

Shahiki tash, M. and Ghodrat, M. (2012). Identify factors affecting the dumping, International Journal of Academic Research in Business and Social Sciences, vol 2, issue 11,pp: 1-10