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The impact of globalization on the composition of government expenditures: Evidence from panel data

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Author Info
Axel Dreher () (Department of Management, Technology, and Economics, ETH Zurich)
Jan-Egbert Sturm () (Department of Management, Technology, and Economics, ETH Zurich)
Heinrich W. Ursprung () (University of Konstanz, Department of Economics)

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Abstract

According 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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Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 06-141.

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Length: 42 pages
Date of creation: Jun 2006
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Handle: RePEc:kof:wpskof:06-141

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Related research
Keywords: globalization; economic policy; government expenditure composition; tax competition;

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Find related papers by JEL classification:
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

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Axel Dreher & Peter Nunnenkamp & Rainer Thiele, 2006. "Does Aid for Education Educate Children? Evidence from Panel Data," Kiel Working Papers 1290, Kiel Institute for the World Economy. [Downloadable!]
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  2. Andreas Haufler & Alexander Klemm & Guttorm Schjelderup, 2008. "Economic integration and the relationship between profit and wage taxes," Working Papers 0810, Oxford University Centre for Business Taxation. [Downloadable!]
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  3. Antonio Estache & Marianela González & Lourdes Trujillo, 2007. "Government Expenditures on Education, Health, and Infrastructure: A Naïve Look at Levels, Outcomes, and Efficiency," City University Economics Discussion Papers 07/03, Department of Economics, City University, London. [Downloadable!]
    Other versions:
  4. Nelly Exbrayat, 2008. "The Impact of Trade Integration and Agglomeration Economies on Tax Interactions : Evidence from OECD Countries," Post-Print hal-00270067_v1, HAL. [Downloadable!]
  5. Carone, Giuseppe & Nicodème, Gaëtan & Schmidt, Jan, 2007. "Tax revenues in the European Union: Recent trends and challenges ahead," MPRA Paper 3996, University Library of Munich, Germany. [Downloadable!]
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