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Trade openness and public expenditure. The Spanish case, 1960–2000

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  • Estela Sáenz
  • Marcela Sabaté
  • M. Gadea

Abstract

The empirical link between the post-WWII expansion of international market integration and the growth of national public expenditure has been widely noted, with no consensus as yet regarding the interpretation of this correlation. We posit that a likely link between increased openness and public spending is the use of the latter to offset changes in the distribution of income that result from increased openness. To explore this potential link, we study time series data from Spain in 1960–2000, a period of major changes in political organization as well as in both fiscal and trade policy. We find evidence that democracy reinforced the causal relation from increased openness to greater public expenditure. Thus, the paper contributes to the literature that emphasizes that changes in political regimes are potentially important determinants of the observed international patterns of openness and government size. Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • Estela Sáenz & Marcela Sabaté & M. Gadea, 2013. "Trade openness and public expenditure. The Spanish case, 1960–2000," Public Choice, Springer, vol. 154(3), pages 173-195, March.
    • Handle: RePEc:kap:pubcho:v:154:y:2013:i:3:p:173-195
    DOI: 10.1007/s11127-011-9841-8
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    More about this item

    Keywords

    Trade openness; Public expenditure; Democracy; Cointegration; Structural breaks; F41; H11;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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