Trade Openness, Gains from Variety and Government Spending
AbstractThis 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.
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Bibliographic InfoPaper provided by Socioeconomic Institute - University of Zurich in its series SOI - Working Papers with number 1004.
Length: 46 pages
Date of creation: Apr 2010
Date of revision:
education; schooling; Switzerland;
Find related papers by 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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