The impact of globalization on the composition of government expenditures: Evidence from panel data
AbstractAccording to the disciplining hypothesis, globalization restrains governments by inducing increased budgetary pressure. As a consequence, governments shift their expenditures in favour of transfers and subsidies and away from capital expenditures. This expenditure shift is potentially enhanced by citizens’ preferences to be compensated for the risks of globalization (“compensation hypothesis”). Employing two different datasets and various measures of globalization, we analyze whether globalization has indeed influenced the composition of government expenditures. For a sample of 108 countries, we examine the development of four broad expenditure categories for the period 1970-2001: capital expenditures; expenditures for goods and services; interest payments; and subsidies and other current transfers. A second dataset provides a much more detailed classification: public expenditures, expenditures for defence, order, economic environment, housing, health, recreation, education, and social expenditures. However, this second data set is only available since 1990 – and only for the OECD countries. Our results show that globalization did not influence the composition of government expenditures.
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Bibliographic InfoPaper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 06-141.
Length: 42 pages
Date of creation: Jun 2006
Date of revision:
globalization; economic policy; government expenditure composition; tax competition;
Other versions of this item:
- Axel Dreher & Jan-Egbert Sturm & Heinrich Ursprung, 2008. "The impact of globalization on the composition of government expenditures: Evidence from panel data," Public Choice, Springer, vol. 134(3), pages 263-292, March.
- Axel Dreher & Jan-Egbert Sturm & Heinrich Ursprung, 2006. "The Impact of Globalization on the Composition of Government Expenditures: Evidence from Panel Data," CESifo Working Paper Series 1755, CESifo Group Munich.
- H7 - Public Economics - - State and Local Government; Intergovernmental Relations
- H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
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