1 / 12

Stephanie J. Rickard School of Law and Government Dublin City University

Trade Openness and the Composition of Government Spending: Further Disentangling the Ties that Bind. Stephanie J. Rickard School of Law and Government Dublin City University. Motivation . How do governments’ budgets respond to globalization? Research on spending levels :

beck-patel
Download Presentation

Stephanie J. Rickard School of Law and Government Dublin City University

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Trade Openness and the Composition of Government Spending: Further Disentangling the Ties that Bind Stephanie J. Rickard School of Law and Government Dublin City University

  2. Motivation • How do governments’ budgets respond to globalization? • Research on spending levels: • Aggregate spending (e.g. Cameron 1978; Rodrik 1997) • Social welfare spending (e.g. Burgoon 2003; Rudra 2002) • How might the formof spending change in response to globalization?

  3. Motivation • Openness affects how governments allocate resources across spending programs • Different spending programs serve different purposes • Social welfare spending compensates • Sector spending protects • Lowers production costs • Insures production levels • Insures rates of return

  4. Argument • Governments facing tight budget constraints prioritize sector spending • Sector spending and social welfare spending are not perfect substitutes for trade losers • Beneficiaries of sector programs are politically powerful • Especially when labor unions are weak, as in many developing countries (Kaufman and Segura-Ubiergo 2001; Rudra 2002)

  5. Empirical implication • In developing countries, the budget share of sector programs will increase with trade openness.

  6. Empirical tests: Quantitative • Sample: 44 developing countries from 1981-1997 • Primary estimation technique: Error correction model ∆(Yit) = β0 + β1∙(Yit-1) + γ∆Xt + λXt-1 + εit Y= social welfare spending (% total expenditures); sector spending (% total expenditures) X = vector of RHS variables: trade openness; democracy; dependency; ideology; GDP per capita

  7. Full

  8. Robustness checks • Geographic instruments for trade • Control for asset specificity

  9. Robustness checks • Geographic instruments for trade • Control for asset specificity • Imports versus exports • SUR • Financial openness • IMF programs

  10. Conclusion & implications • Some part of the reduction in social welfare spending observed in developing countries may be due to the reallocation of resources across different spending programs. • Governments in developing countries can and do work to offset the costs of globalization but they do so using sector programs to protectrather than social welfare programs to compensate. • Openness influences not just the level of spending but also the form.

More Related