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Trade Openness, Gains from Variety and Government Spending

Author

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  • Sandra Hanslin

    (Socioeconomic Institute, University of Zurich)

Abstract

This paper investigates empirically the effect of import diversity on government size and provides evidence for the love of variety effect on government spending described in Hanslin (2008). I argue that crowding out of firms is an important cost of public good provision. However, due to the access to foreign varieties, national costs of public good provision are lower and therefore, public good provision is higher. Especially for OECD countries this channel seems to exist. The diversity of imported products has a positive effect on government consumption, particularly when these goods are classified as differentiated. In addition, this positive effect is decreasing in home market size. Further, the direct effect of the share of differentiated in total imported products on the government share is negative.

Suggested Citation

  • Sandra Hanslin, 2010. "Trade Openness, Gains from Variety and Government Spending," SOI - Working Papers 1004, Socioeconomic Institute - University of Zurich.
    • Handle: RePEc:soz:wpaper:1004
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    File URL: https://www.econ.uzh.ch/apps/workingpapers/wp/wp1004.pdf
    File Function: First version, 2010
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    Cited by:

    1. Polk, Andreas & Schmutzler, Armin & Müller, Adrian, 2014. "Lobbying and the power of multinational firms," European Journal of Political Economy, Elsevier, vol. 36(C), pages 209-227.
    2. Michele Sennhauser, 2009. "Why the Linear Utility Function is a Risky Choice in Discrete-Choice Experiments," SOI - Working Papers 1014, Socioeconomic Institute - University of Zurich.
    3. Michael Benarroch & Manish Pandey, 2017. "The Impact of Imports and Exports on the Size and Composition of Government Expenditures," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(3), pages 57-68, March.

    More about this item

    Keywords

    education; schooling; Switzerland;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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