Advanced Search
MyIDEAS: Login to save this paper or follow this series

The impact of economic openness on the vertical structure of the public sector

Contents:

Author Info

  • Antonio Sciala'

    ()
    (Universita' di Padova)

  • Paolo Liberati

    ()
    (Universita' di Roma)

Abstract

The aim of this paper is to investigate the impact of economic openness on the vertical structure of the public sector within a country. To tackle this issue we set up a simple theoretical model of fiscal federalism, where both central and local public spending enter the objective functions of both a central government and an aggregate local public sector, accommodating a wide range of behaviours. The degree of economic openness is assumed to erode central tax revenues and through this channel to affect the size of central spending, the size of grants paid to local governments and the optimal amount of local public spending. Consequences on the degree of decentralization are investigated. The main findings are that for a large subset of parameters an increase in economic openness leads to: a) a lower level of central government expenditures; b) a lower level of general government expenditures; c) a higher level of local taxation; d) a higher degree of public sector decentralization.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.decon.unipd.it/assets/pdf/wp/20080085.pdf
Our checks indicate that this address may not be valid because: 500 Can't connect to www.decon.unipd.it:80 (10060). If this is indeed the case, please notify (Fabio Maria Manenti)
Download Restriction: no

Bibliographic Info

Paper provided by Dipartimento di Scienze Economiche "Marco Fanno" in its series "Marco Fanno" Working Papers with number 0085.

as in new window
Length: 26 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:pad:wpaper:0085

Contact details of provider:
Postal: via del Santo, 33 - 35122 Padova
Phone: +39 +49 8274210
Fax: +39 +49 827.4211
Web page: http://www.decon.unipd.it/
More information through EDIRC

Related research

Keywords: openness; decentralization; fiscal federalism; public sector; government size.;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Slemrod, Joel, 2004. "Are corporate tax rates, or countries, converging?," Journal of Public Economics, Elsevier, vol. 88(6), pages 1169-1186, June.
  2. Alberto Alesina & Enrico Spolaore, 1995. "On the Number and Size of Nations," NBER Working Papers 5050, National Bureau of Economic Research, Inc.
  3. Rodden, Jonathan, 2003. "Reviving Leviathan: Fiscal Federalism and the Growth of Government," International Organization, Cambridge University Press, vol. 57(04), pages 695-729, September.
  4. Bretschger, Lucas & Hettich, Frank, 2002. "Globalisation, capital mobility and tax competition: theory and evidence for OECD countries," European Journal of Political Economy, Elsevier, vol. 18(4), pages 695-716, November.
  5. Frey, Bruno S. & Eichenberger, Reiner, 1996. "FOCJ: Competitive governments for Europe," International Review of Law and Economics, Elsevier, vol. 16(3), pages 315-327, September.
  6. Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc.
  7. Salmon, Pierre, 1987. "Decentralisation as an Incentive Scheme," Oxford Review of Economic Policy, Oxford University Press, vol. 3(2), pages 24-43, Summer.
  8. Axel Dreher, 2003. "The Influence of globalization on taxes and social policy - an empirical enalysis for OECD countries," Discussion Papers 0301, Exeter University, Department of Economics.
  9. Signe Krogstrup, 2003. "Are Capital Taxes Racing to the Bottom in the European Union?," IHEID Working Papers 01-2003, Economics Section, The Graduate Institute of International Studies.
  10. Tanzi, Vito, 2002. "Globalization and the Future of Social Protection," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(1), pages 116-27, February.
  11. Oates, Wallace E, 1985. "Searching for Leviathan: An Empirical Study," American Economic Review, American Economic Association, vol. 75(4), pages 748-57, September.
  12. Günther G. Schulze & Heinrich W. Ursprung, 1999. "Globalisation of the Economy and the Nation State," The World Economy, Wiley Blackwell, vol. 22(3), pages 295-352, 05.
  13. Alesina, Alberto & Wacziarg, Romain, 1998. "Openness, country size and government," Journal of Public Economics, Elsevier, vol. 69(3), pages 305-321, September.
  14. Jing Jin & Heng-fu Zou, 2000. "How does fiscal decentralization affect aggregate, national, and subnational government size?," CEMA Working Papers 72, China Economics and Management Academy, Central University of Finance and Economics.
  15. Andrew Atkeson & Tamim Bayoumi, 1993. "Do private capital markets insure regional risk? Evidence from the United States and Europe," Open Economies Review, Springer, vol. 4(3), pages 303-324, September.
  16. Persson, Torsten & Tabellini, Guido, 1996. "Federal Fiscal Constitutions: Risk Sharing and Moral Hazard," Econometrica, Econometric Society, vol. 64(3), pages 623-46, May.
  17. Yingyi Qian & Gerard Roland, . "Federalism and the Soft Budget Constraint," Working Papers 97045, Stanford University, Department of Economics.
  18. Stegarescu, Dan, 2004. "Economic Integration and Fiscal Decentralization: Evidence from OECD Countries," ZEW Discussion Papers 04-86, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  19. John Wilson & Eckhard Janeba, 2003. "Decentralization and International Tax Competition," CESifo Working Paper Series 854, CESifo Group Munich.
  20. Brennan,Geoffrey & Buchanan,James M., 1980. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521233293, April.
  21. Liberati, Paolo, 2007. "Trade openness, capital openness and government size," MPRA Paper 44371, University Library of Munich, Germany.
  22. Bolton, Patrick & Roland, Gérard, 1995. "The Break up of Nations: A Political Economy Analysis," CEPR Discussion Papers 1225, C.E.P.R. Discussion Papers.
  23. Besfamille, Martin & Lockwood, Ben, 2004. "Are Hard Budget Constraints for Sub-National Governments Always Efficient?," The Warwick Economics Research Paper Series (TWERPS) 717, University of Warwick, Department of Economics.
  24. Ernesto Stein, 1999. "Fiscal Decentralization and Government Size in Latin America," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 357-391, November.
  25. Alesina, Alberto & Perotti, Roberto, 1998. "Economic Risk and Political Risk in Fiscal Unions," Economic Journal, Royal Economic Society, vol. 108(449), pages 989-1008, July.
  26. Persson, Torsten & Tabellini, Guido, 1996. "Federal Fiscal Constitutions: Risk Sharing and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 979-1009, October.
  27. Yingyi Qian & Barry R. Weingast, 1997. "Federalism as a Commitment to Reserving Market Incentives," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 83-92, Fall.
  28. Garen, John & Trask, Kathleen, 2005. "Do more open economies have bigger governments? Another look," Journal of Development Economics, Elsevier, vol. 77(2), pages 533-551, August.
  29. Casella, Alessandra & Frey, Bruno, 1992. "Federalism and clubs : Towards an economic theory of overlapping political jurisdictions," European Economic Review, Elsevier, vol. 36(2-3), pages 639-646, April.
  30. Antonis Adam & Pantelis Kammas, 2007. "Tax policies in a globalized world: Is it politics after all?," Public Choice, Springer, vol. 133(3), pages 321-341, December.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pad:wpaper:0085. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fabio Maria Manenti).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.