Openness, Country Size, and Governments: Dynamic Panel Evidence

Abstract

This paper extends the results of Rodrik (1998), Alesina and Wacziarg (1998), Ram (2009), Jetter and Parmeter (2015), Musau (2018) and other replication studies by providing dynamic panel estimates of the influence of country size and openness on government size. The estimates suggest that past levels of government spending explain most of the observed correlation between country size and government size and if omitted, result in upward bias in the coefficient of openness.