This paper investigates the relationship between trade openness and the size of governments, 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,...

The increase in income per capita is accompanied, in virtually all countries, by two changes in the structure of the economy, namely an increase in the share of government spending in GDP and an increase in female labour force participation. This paper suggests that these two changes are...

This Paper presents an analysis of how alternative models of the business cycle can replicate the stylized fact that large governments are associated with less volatile economies. Our analysis shows that adding nominal rigidities and costs of capital adjustment to an otherwise standard RBC model...

This paper presents instrumental variables estimates of the effects of GDP per capita volatility on the size of government. We show that for a panel of 157 countries spanning more than half a century rainfall volatility has a significant positive effect on GDP per capita volatility in countries...

We study how financial transactions may respond to exogenous variation in trade opportunities not only directly, but also through policy channels. In more open economies, governments may find it more difficult to fund and enforce public policies that substitute private financial transactions,...

We analyze the joint dynamics of religious beliefs, scientific progress and coalitional politics along both religious and economic lines. History offers many examples of the recurring tensions between science and organized religion, but as part of the paper’s motivating evidence we also...

To what extent has Sub-Saharan Africa’s slow economic growth over the past five decades been due to price and trade policies that have discouraged production of agricultural relative to non-agricultural tradables? This paper uses a new set of estimates of policy distortions to relative prices...

We model technological and financial innovation as reflecting the decisions of profit maximizing agents and explore the implications for economic growth. We start with a Schumpeterian endogenous growth model where entrepreneurs earn monopoly profits by inventing better goods and financiers arise...

We develop a stylized model of economic growth with bubbles. In this model, financial frictions lead to equilibrium dispersion in the rates of return to investment. During bubbly episodes, relatively inefficient investors demand bubbles while relatively efficient investors supply them. Because...

In many western democracies, political parties with extreme platforms challenge more moderate incumbents. This paper analyses the impact of economic growth on the support for extreme political platforms. We provide a theoretical argument in favor of growth effects (as opposed to level effects)...