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Capital and Labor Mobility and the Size of Sub-national Governments: Evidence from a Panel of Mexican States

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  • Rene Cabral Torres

Abstract

We examine in this paper the relation between government size and capital and labor openness employing a panel of the 32 Mexican states over the period 1996-2006. Making use of two alternative measures of capital and labor openness and employing several alternative econometric specifications, we first find systematic positive effects of our openness measures on the size of the states’ total government spending. Thereafter, we break down total government expenditure and focus on three subcategories of spending associated with social welfare: education, health and poverty alleviation programs. We find that FDI flows, our proxy for capital openness, are not significant determinants of the state’s social spending, but labor openness, in the form of international migration, has a significant and even greater impact on some of the aforementioned categories than on total spending.

Suggested Citation

  • Rene Cabral Torres, 2012. "Capital and Labor Mobility and the Size of Sub-national Governments: Evidence from a Panel of Mexican States," CID Working Papers 231, Center for International Development at Harvard University.
    • Handle: RePEc:cid:wpfacu:231
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    References listed on IDEAS

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    More about this item

    Keywords

    Capital Inflows; Migration; Globalization; Government Size; Panel Data Methods; Mexico.;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs

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