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State Capacity and the Quality of Policies. Revisiting the Relationship between Openness and Government Size

Listed author(s):
  • Mariano Tommasi

    ()

    (Department of Economics, Universidad de San Andres)

  • María Franco Chuaire

    (Banco Interamericano de Desarrollo)

  • Carlos Scartascini

    (Banco Interamericano de Desarrollo)

Countries with different levels of state capacity have access to different sets of policies. In particular, countries with strong state capabilities are able to draw from a broader menu of policies, and pick and successfully implement those policies that best suit the nature of their challenges. In the case of exposure to trade related risk, the literature has usually considered that only one type of policies –those increasing government size- can help to overcome the challenge. However, there are a number of policies that can mitigate trade-induced risks, many of which do not have the necessary implication of increasing public spending. Yet, many such policies require governmental capabilities not available to any country. For that reason, the relationship between openness and the size of government might be mediated by the capabilities of states. The empirical analysis in this paper shows exactly that.

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File URL: ftp://webacademicos.udesa.edu.ar/pub/econ/doc115.pdf
File Function: First version, 2014
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Paper provided by Universidad de San Andres, Departamento de Economia in its series Working Papers with number 115.

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Length: 71 pages
Date of creation: Nov 2014
Date of revision: Nov 2014
Handle: RePEc:sad:wpaper:115
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