Does trade openness systematically imply bigger governments, as proposed by Rodrik (1998)? This paper presents a novel and more refined explanation for when and why international trade may enlarge the public sector. We propose that trade openness is associated with bigger governments if (i) the...

This article examines the potential role of government size in explaining differences in output volatility across OECD countries in the context of the latest recession. There is some evidence to suggest that government size as measured by the share of expenditure in GDP has a modest negative...

This paper analyzes the relationship between the net foreign asset position of a country, and government size and consumption–wealth ratio in a stochastically growing small open economy. The model suggests that more indebted countries are associated with bigger governments when...

Government is often considered the safe sector of an open economy that provides households with insurance against external risk exposure. Among highly integrated economies, however, households should be able to exploit common financial markets to insure themselves. In this paper we examine the...

Empirical evidence for the compensation hypothesis holds that trade openness independent of income risk has no significant effects on government size. Hence, using time series data for the period 1965-2013 from Egypt, Ghana, Kenya, Nigeria and South Africa and applying the bounds test method of...

Government is often considered the safe sector of an open economy that provides households with insurance against external risk exposure. Among highly integrated economies, however, households should be able to exploit common financial markets to insure themselves. In this paper we examine the...