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, it finds that globalization reduces government size and debt. In terms of components of globalization, government size is found to increase with trade openness but decreases with financial, social and political globalization. On the other hand, government debt increases with financial and trade openness but decreases with social and political globalization. The evidence is robust to different estimation methods and different samples. Our data also indicate unidirectional causality running from globalization measures to government size and debt.
Bibliographical noteFunding Information:
The usual disclaimer applies. Yu-Bo Suen gratefully acknowledges the financial support of Taiwan’s Ministry of Science and Technology through grant MOST: [Grant Number 103-2410-H-156-003].
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- Government size
- government debt
- heterogeneous panels
ASJC Scopus subject areas
- Economics and Econometrics