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Trade Openness, Gains from Variety and Government Spending

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Author Info

  • 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.

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File URL: http://www.soi.uzh.ch/research/wp/2010/wp1004.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by University of Zurich, Socioeconomic Institute in its series Working Papers with number 1004.

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Length: 46 pages
Date of creation: Apr 2010
Date of revision:
Handle: RePEc:soz:wpaper:1004

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Related research

Keywords: education; schooling; Switzerland;

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Cited by:
  1. Michele Sennhauser, 2009. "Why the Linear Utility Function is a Risky Choice in Discrete-Choice Experiments," Working Papers 1014, University of Zurich, Socioeconomic Institute.
  2. Andreas Polk & Armin Schmutzler & Adrian Muller, 2010. "Lobbying and the Power of Multinational Firms," Working Papers 1008, University of Zurich, Socioeconomic Institute.

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