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This paper adds to research on the international drivers of corruption and anti‐corruption by focusing on the influence of regional trade agreements (RTAs). Using cross‐national data and employing a social network analysis, we provide descriptions of the evolution of deep integration of RTAs' network in anti‐corruption and transparency with a comprehensive view in which we utilise the network's Closeness, Harmonic, Betweenness, Eigenvector, and PageRank centralities to demonstrate the positions of member countries. We examine the relations of the positions of member countries in the deep RTAs' network and the performance of those countries in fighting corruption. Our empirical results suggest that the countries which hold dominant positions in the deep RTAs' network may be associated with better performance in fighting corruption. At the same time, countries which may have traditionally lagged in the enforcement of anti‐bribery and corruption laws will benefit through the transfer of best practices and technical expertise in rulemaking and enforcement by using their positions in the deep RTAs' network. Furthermore, our results indicate that the provisions related to anti‐corruption or transparency in RTAs will play more important roles in fighting public sector corruption for member countries. The findings are robust to alternate corruption and governance measures. [ABSTRACT FROM AUTHOR]

Does trade openness systematically imply bigger governments, as proposed by Rodrik (Journal of Political Economy, 106, 997 and 1998)? This paper presents a novel and more refined explanation for when and why international trade may enlarge the public sector. We propose that trade openness is associated with bigger governments via the compensation pathway if i$$ (i) $$ the price volatility of a country's export basket is substantial andii$$ (ii) $$ the country is democratic. The first condition satisfies the prior that trade openness introduces uncertainty and external risk. The second condition ensures that the people's desire for greater economic security can be realised through government spending. Empirical evidence for 137 countries, that account for approximately 95% of world population, from 2000–2016 is consistent with this hypothesis. Exploring areas of public spending, we find intuitive patterns. Consistent with the compensation hypothesis, government spending on economic affairs and housing increases significantly with trade openness, whereas spending on education, health care, and the military is not affected. As with our general result, this is only the case in democracies that are subject to high price volatility on the global market. [ABSTRACT FROM AUTHOR]

This paper examines the mediating effect of democracy in explaining the relationship between decentralization and government size for the period 1970–2013. We proxy decentralization by fiscal decentralization, use total spending as our primary measure of government size and adopt the V‐Dem high‐level democracy indices as measures of democracy. Our main finding is that the relationship between fiscal decentralization and government spending differs under different types of democracy. From the interaction term, the negative effect of fiscal decentralization diminishes as the democracy level gets higher, particularly for participatory democracy irrespective of whether government size is measured by spending‐to‐GDP or employment. [ABSTRACT FROM AUTHOR]

Objective: This paper studies the direct and indirect impacts of political regimes on corruption. Whereas the interplay of government is fundamental to corrupt acts, the present research sheds new light by showing the direct and indirect influences of dimensions of government structure on corruption. Methods: We employ two different estimation techniques. First, we use OLS regressions, with year and regional dummies. Second, we employ mediation analysis to account for the intermediate role of government size in the relation between government structure and corruption in order to gauge the direct and indirect influences on corruption Results: Results show that government structure, across various dimensions of authoritarian and nonauthoritarian regimes, significantly impacted cross‐national corruption. In particular, a nation's stock of democracy and parliamentary systems lowered corruption, while executive tenure and dimensions of authoritarianism added to corruption. On the other hand, the size of the legislature did not matter when it came to corruption. However, the direct influences of these government structure variables are mitigated or reinforced when the intermediate role of government size is considered in a mediation analysis. Conclusions: The breakdown into the direct and indirect effects on corruption is a novel insight of this work, with useful policy implications. [ABSTRACT FROM AUTHOR]

This paper examines how power struggle among cliques within ruling parties shape public policies. We develop a simple model of bargaining among ruling elites to study government staffing and use it to explain why the number of subnational government staff in China has increased rapidly despite repeated government streamlining programs initiated by the central authority. Using provincial‐level panel data in China from 1992 to 2011, we show that the subnational government headed by a politically weaker party secretary, in terms of the size of the opposition of elites in the provincial standing committee, tends to have a larger number of senior cadres and public employees. Notably, the party secretary's power from the centre mitigates the tendency to expand government staff. We also provide suggestive evidence that the local government finances government expansion by selling more land. [ABSTRACT FROM AUTHOR]

We provide new evidence on the effects of fiscal policy and government size on pairwise business cycle synchronization in EMU. A novel time‐varying framework is employed to estimate business cycle synchronization and subsequently a panel approach is used to establish the role of fiscal variables in determining the pairwise synchronization observations across time. The findings suggest similarities in the size of the public sector, yet divergence in fiscal policy stance, matter for the determination of business cycle synchronization. Hence, increased fiscal federalism in EMU will contribute to increased business cycle synchronization. Our results remain robust to different specifications and sub‐periods. [ABSTRACT FROM AUTHOR]

Abstract: In this paper, we introduce urbanization as an important driver of government size. Using panel data for 175 countries from 1960 to 2010, we find that there is a close link between urbanization and the size of the public sector, especially when looking at education, health care, and social issues. Various robustness checks confirm this finding. An analysis of state‐level public spending in Colombia and Germany confirms our hypothesis on the subnational level. On the microeconomic level, people in urban areas acknowledge that governments should take more responsibility, and they are more in favor of redistribution. This finding can help to explain the evolution of government size, and it can also predict the present and future needs of urbanizing areas. [ABSTRACT FROM AUTHOR]

Abstract: In this paper I use a panel of 133 developing countries for the period 1972 to 2012 to estimate the effect of workers’ remittances on the size of government. Controlling for country and period fixed effects that jointly affect workers’ remittances and government size, the paper finds that workers’ remittances are associated with larger government. The paper further examines whether democratic institutions mediate the relationship between workers’ remittances and government size. Democratic institutions do not significantly mediate the effect that workers’ remittances have on the size of government. [ABSTRACT FROM AUTHOR]

Abstract: We explore the relationship between government size and economic growth in an endogenous growth model with human capital and an unproductive capital which facilitates rent‐seeking. With exogenous as well as endogenous time discounting, we find a non‐monotonic relationship between the size of government and economic growth. We find that with very high (low) discounting, there is a unique low (high) growth equilibrium, regardless of the size of government. For the intermediate range of discounting, there are multiple equilibria and the growth outcome depends on the size of government. With endogenous time discounting, the growth outcome is path dependent and depends on the level of inherited human capital. However, there is only one stable growth regime and the economy endogenously switches to it. When the institutional constraints on rent‐seeking are not extremely high, the stable regime is the one in which there is a high‐growth equilibrium for a smaller size of the government and for larger size, both the high‐growth and the low‐growth equilibrium coexist. When the institutional constraints on rent‐seeking are extremely high, there exists only a unique high‐growth equilibrium irrespective of the size of government. Furthermore, economies with bigger size of the government and/or with poor quality institutions will take longer to endogenously switch to this stable growth regime. [ABSTRACT FROM AUTHOR]

This paper analyses the effects of the size of government on economic growth in a stochastic endogenous growth model involving the supply-side effect and demand-side effect produced by government spending. We show that a rise in the government spending affects economic growth through three channels, including the crowding-out effect, the spin-off effect and the resource mobilisation effect. We demonstrate that there exists an optimal size of government that maximises the economic growth rate. [ABSTRACT FROM AUTHOR]

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 than countries with lower capabilities. We apply and test this insight to the case of exposure to trade-related risk. So far, most of the literature has considered that only one type of policy-the one that increases government size-can help to overcome the challenge imposed by openness. 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, while the choice of a particular policy within a menu depends on political conditions, the relationship between openness and the size of government might be mediated by the capabilities of states. This paper provides reduced form evidence confirming that the empirical relationship between openness and government size is conditional on state capabilities. Therefore, public policies cannot be assessed independently of the capacity of the State that would have to implement them. [ABSTRACT FROM AUTHOR]

This article examines the relationship between council size and municipal expenditures in Quebec's largest municipalities. Two claims commonly found in the literature are tested: the professionalization and the law of 1/n hypotheses. Using cross-sectional data, the professionalization hypothesis is confirmed: each elected official costs more in a smaller council. As for the law of 1/n, the effect of council size on total government expenditures is not significant. These results refute the cost saving argument for smaller councils and suggest that other aspects, such as quality of democratic life and efficiency in decision-making, may be more relevant to the debate. [ABSTRACT FROM AUTHOR]

Given inelastic demand for labour-intensive public services, the size of government depends positively on labour costs. OECD data exhibit a strong statistical association between government size and the business-sector labour share of income. When the labour share is instrumented with measures of technological change, institutional variation and predetermined data it continues to positively impact government size. In contrast, transfer spending is unaffected by the labour share. The evidence is consistent with the idea that the recent decline in the labour share has contributed to the slowdown in the growth of government witnessed in much of the post-war era. [ABSTRACT FROM AUTHOR]

Since the late 1970s, the received wisdom has been that government size (measured as the ratio of total government expenditure to gross domestic product ( GDP) or government consumption to GDP) is detrimental to economic growth. We conduct a hierarchical meta-regression analysis of 799 effect-size estimates reported in 87 primary studies to verify if this assertion is supported by existing evidence. Our findings indicate that the conventional prior belief is supported by evidence mainly from developed countries but not from less developed countries. We argue that the negative relationship between government size and economic growth in developed countries may reflect endogeneity bias. [ABSTRACT FROM AUTHOR]

This paper examines the effects of fiscal decentralization and flat administrative structure on local budget size and program outlays. We test three related theoretical hypotheses in China's adoption of province-over-county scheme of financial administration. We provide evidence that both decentralization of expenditure and decentralization of revenue increase the size of local budgets; that the impact of the former far outweighs that of the latter with local budgets on a rising trajectory; and that discretion grants localities more means to increase their budget. These results show that as China's reform deepens the proportion of local outlay on administration declines because of more local discretion from eliminating the prefecture bypass between the province and counties. But neither decentralization nor increased local discretion has allocated more local resources for education, and both contribute to increasing outlay on economic development. The paper formulates tentative policy recommendations that carry potential application for other countries. Copyright © 2016 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

In our 2011 survey of the literature in the Journal of Economic Surveys on the effect of government size on economic growth in wealthy countries we find a relatively consistent pattern: An increase in government size by 10 percentage points is associated with a 0.5-1 percentage point lower annual growth rate. This conclusion is questioned by Colombier. In this rejoinder we present a rebuttal of Colombier's argument based on a detailed scrutiny of his own statistical evidence and regression results. Furthermore, we note that several new papers that have appeared since our original paper was published give support to our main conclusion. [ABSTRACT FROM AUTHOR]

In contrast to the commonly held view, Bergh and Henrekson (2011) conclude that a consensus has almost been reached on the thesis that government size is negatively correlated with economic growth in developed countries. They underpin this by claiming that the only study in the survey to deviate from this consensus view, i.e. Colombier (2009), was rebutted by Bergh and Öhrn (2011). This comment shows that the claim by Bergh and Henrekson (2011) cannot be upheld because the analysis by Bergh and Öhrn (2011) is based on a flawed dataset. The re-estimation of Colombier's (2009) regressions with time-fixed effect does not reject his main findings. Moreover, it is demonstrated that recent empirical evidence on the growth impact of government size in rich countries is not as unanimous as the survey by Bergh and Henrekson (2011) suggests. Thus, the claim that a consensus view has been reached is premature. [ABSTRACT FROM AUTHOR]

This paper studies the role of Ramsey taxation under the assumption that the individual rate of time preference is determined by the publicly provided social level of education. We show how intertemporal complementarities of aggregate human capital can generate multiple equilibria and we examine the role of endogenous fiscal policies in equilibrium selection. Our analysis implies a lower optimal government size due to the effect of human capital on time preference. [ABSTRACT FROM AUTHOR]

This paper investigates how government size affects tax evasion in China. Using matched county-firm data for 1998-2005, we estimate the impact of county government size on the relationship between a firm's reported profit and imputed profit based on the national income accounts. A larger government is found to be correlated with more severe tax evasion, especially for state-owned and collectively-owned firms. Such an effect is stronger when local governance become worse. This paper shows that a large government does not bring about a strong state capacity to enforce tax rules at the local level in China. [ABSTRACT FROM AUTHOR]

In this paper we analyse how the availability of credit influences the relationship between government size as a proxy for fiscal stabilization policy and the amplitude of business cycle fluctuations in a sample of advanced OECD countries. Interpreting relatively low loan-to-value ratios as an indication of tight credit constraints, we find that government size exerts a stabilizing effect on output and consumption growth fluctuations only when credit constraints are relatively tight. Our results provide support for the hypothesis that credit market frictions play a crucial role in the transmission of fiscal policy. [ABSTRACT FROM AUTHOR]

This paper proposes a theoretical model that may provide useful insights into the relationship between trade openness and the size of government, as well as a possible explanation for the results of empirical tests of such a relationship. We develop a Hecksher-Ohlin model with publicly provided goods, where the level of publicly provided goods is determined in a probabilistic voting framework. In this context, we show that the start of trade may increase or decrease government size depending on the capital-labor ratio in each country. [ABSTRACT FROM AUTHOR]

We provide a test of the impact of voters' political ideology on economic growth and of the role of preferences for government size as a transmission channel. We focus on France from the beginning of its stable democratic experience in 1871. A move of voters' ideology to the right increases economic growth over the total observation period. However, the growth effect of ideology is mediated by voters' preferences for government size only during the post-World War II period. For reverse causality concerns, we use the political ideology of other historical democracies as an instrument variable for France's ideology. ( JEL E6, O43, H11) [ABSTRACT FROM AUTHOR]

This paper examines the causal effect that trade openness has on government size in small developing countries (SDCs). We use the construction of the trade cost variables based on Baltic Dry Index in primary goods as instruments of trade openness to address the endogeneity issue. We find that the increase in trade openness leads to an increase in government size: a 1 percent expansion in trade openness (trade GDP ratio) raises government consumption over GDP ratio by approximately 0.1-0.2 percentage points on average. Its quantitative significance emphasizes the importance of rethinking the costs and benefits of trade openness for SDCs. [ABSTRACT FROM AUTHOR]

ABSTRACT Theoretical models suggest a non-linear relationship between government size and long-run economic growth. However, testing this hypothesis empirically in cross-country studies is complicated by the endogeneity of government spending and the accurate identification of inflexion points. This paper examines the non-linear hypothesis by incorporating threshold analysis in a cross-country growth regression. The methodology utilizes a sample-splitting framework and follows an objective strategy for identifying and testing changes in the slope. The results provide evidence in support of the non-linear hypothesis for a broad panel of countries. [ABSTRACT FROM AUTHOR]

We show that an expansion in the government size could be desirable from the viewpoint of the economy's long-run growth, wherein factor intensity between the sectors, the mode of public spending financing, and the form of the cash-in-advance (CIA) constraint are crucial. We also show that when real balances are required only for consumption purchases, money financing is equivalent to consumption tax financing, but is not equivalent to income tax financing. If both consumption and gross investment are liquidity-constrained, then the three financing methods are mutually not equivalent. The optimal financing scheme has the following features: (1) when the CIA constraint applies only to consumption purchases, any combination of the money growth rate and the consumption tax rate that satisfies the government budget constraint constitutes an optimal financing mix; (2) when the CIA constraint applies to both consumption and investment purchases, consumption tax financing only is optimal. [ABSTRACT FROM AUTHOR]

This paper shows evidence of strong heterogeneity in the relationship between government size and growth, depending on the quality of public sector institutions. Focusing on a wide sample of developed and developing countries over the period 1981-2005, we find that government size reduces growth when bureaucracy quality is low, whereas no significant effect is observed for sufficiently high levels of bureaucracy quality. The results hold both in cross-section and panel data analyses and are robust to a large number of robustness checks. These findings have important implications for assessing the role of government size in economic growth. [ABSTRACT FROM AUTHOR]

Objective Does increasing a political party's power lead to Leviathan state governments? The evidence is mixed. We use the Economic Freedom of North America ( EFNA) Index to measure governmental activity to study the impact of political parties on government outcomes. Methods We employ instrumental-variable, panel data methods to regress states' EFNA scores on median voter and differentiated-party variables. Results Party effects are negligible, but a simple median voter explanation emerges. Conclusion As political power is consolidated in either party, economic freedom increases. This is consistent with a model wherein the median voter has effective agency control with positive monitoring costs and prefers a particular level of so-called economic freedom. These results are inconsistent with Leviathan models of state legislatures. [ABSTRACT FROM AUTHOR]