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The Effects of International Openness on the Public Sector Growth: An Evidence from OECD Countries

The Effects of International Openness on the Public Sector Growth: An Evidence from OECD Countries

Ali R. Özdemir
Copyright: © 2016 |Pages: 20
ISBN13: 9781522500537|ISBN10: 1522500537|EISBN13: 9781522500544
DOI: 10.4018/978-1-5225-0053-7.ch006
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MLA

Özdemir, Ali R. "The Effects of International Openness on the Public Sector Growth: An Evidence from OECD Countries." Handbook of Research on Public Finance in Europe and the MENA Region, edited by M. Mustafa Erdoğdu and Bryan Christiansen, IGI Global, 2016, pp. 116-135. https://doi.org/10.4018/978-1-5225-0053-7.ch006

APA

Özdemir, A. R. (2016). The Effects of International Openness on the Public Sector Growth: An Evidence from OECD Countries. In M. Erdoğdu & B. Christiansen (Eds.), Handbook of Research on Public Finance in Europe and the MENA Region (pp. 116-135). IGI Global. https://doi.org/10.4018/978-1-5225-0053-7.ch006

Chicago

Özdemir, Ali R. "The Effects of International Openness on the Public Sector Growth: An Evidence from OECD Countries." In Handbook of Research on Public Finance in Europe and the MENA Region, edited by M. Mustafa Erdoğdu and Bryan Christiansen, 116-135. Hershey, PA: IGI Global, 2016. https://doi.org/10.4018/978-1-5225-0053-7.ch006

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Abstract

Using Ordinary Least Squares (OLS) with panel corrected standard errors for OECD panel data this chapter, in contrast to Compensation hypothesis, finds a negative relationship between openness and the rate of public sector growth. In addition, this inverse relationship is found to be the strongest when electoral systems are more competitive. The empirical results presented here also suggests that openness constrains government growth more when the governments are run by either left-leaning parties or by left-leaning coalitions. This result holds for most measures of government spending and is robust to the inclusion of a wide range of controls. Unlike the existing empirical literature, which focuses on the ‘compensation effect' of openness on government growth, this study supports the ‘competition effect' of openness drawn from the literature on local public finance.

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