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Openness, Financial Markets, and Policies: Cross-Country and Dynamic Patterns

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  • Bertola, Giuseppe
  • Lo Prete, Anna

Abstract

We document significant and robust empirical relationships in cross-country panel data between government size or social expenditure on the one hand, and trade and financial development indicators on the other. Across countries, deeper economic integration is associated with more intense government redistribution, but more developed financial markets weaken that relationship. Over time, controlling for country-specific effects, public social expenditure appears to be eroded by globalization trends where financial market development can more easily substitute for it.

Suggested Citation

  • Bertola, Giuseppe & Lo Prete, Anna, 2008. "Openness, Financial Markets, and Policies: Cross-Country and Dynamic Patterns," CEPR Discussion Papers 7048, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:7048
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    References listed on IDEAS

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    1. Anna Maria Mayda & Kevin H. O'Rourke, 2007. "Risk, Government andd Globalization: International Survey Evidence," The Institute for International Integration Studies Discussion Paper Series iiisdp218, IIIS.
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    5. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
    6. Tullio Jappelli & Marco Pagano, 1994. "Saving, Growth, and Liquidity Constraints," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 83-109.
    7. Clarke, George & Xu, Lixin Colin & Zou, Heng-fu, 2003. "Finance and income inequality : test of alternative theories," Policy Research Working Paper Series 2984, The World Bank.
    8. Hans-Werner Sinn, 2004. "The New Systems Competition," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 5(1), pages 23-38, February.
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    10. Atkinson, A. B. & Piketty, Thomas (ed.), 2007. "Top Incomes Over the Twentieth Century: A Contrast Between Continental European and English-Speaking Countries," OUP Catalogue, Oxford University Press, number 9780199286881.
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    Cited by:

    1. Peter Hoeller & Isabelle Joumard & Mauro Pisu & Debra Bloch, 2012. "Less Income Inequality and More Growth – Are They Compatible? Part 1. Mapping Income Inequality Across the OECD," OECD Economics Department Working Papers 924, OECD Publishing.
    2. Bertola, Giuseppe, 2008. "Labour Markets in EMU - What has Changed and What Needs to Change," CEPR Discussion Papers 7049, C.E.P.R. Discussion Papers.
    3. Felton, Andrew & Reinhart, Carmen M. (ed.), 2009. "The First Global Financial Crisis of the 21st Century Part II: June–December, 2008," Vox eBooks, Centre for Economic Policy Research, number p199.
    4. repec:spr:epolit:v:35:y:2018:i:1:d:10.1007_s40888-018-0097-3 is not listed on IDEAS
    5. Anna Lo Prete, 2018. "Inequality and the finance you know: does economic literacy matter?," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(1), pages 183-205, April.
    6. Giuseppe Bertola & Anna Lo Prete, 2013. "Finance, governments, and trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(2), pages 273-294, June.
    7. Anna Lo Prete, 2016. "Labour Market Institutions and Household Consumption Insurance within OECD Countries," The World Economy, Wiley Blackwell, vol. 39(6), pages 755-771, June.
    8. Bertola, Giuseppe & Lo Prete, Anna, 2010. "Whence Policy? Government Policies, Finance, and Economic Integration," CEPR Discussion Papers 7820, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    financial development; globalization; Social policy;

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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