Federico Podestà

Do government spending and cross-border barriers move together? No long-term relationship in 20 oecd countries, 1970-2009

  • Abstract

Informations and abstract

Keywords: H53 - Government Expenditures and Welfare Programs; F13 - Trade Policy - International Trade Organizations; F38 - International Financial Policy: Financial Transactions Tax; Capital Controls; C33 - Panel Data Models - Spatiotemporal Models.

The current debate on globalisation has rarely regarded the combination between government spending and cross-border barriers as a response to the political complications due to international market exposure. Accordingly, this article wonders whether those policies in affluent democracies have maintained a long-term relationship over recent decades. Two hypotheses are contrasted. The first one assumes that these policies are combined to achieve a protective balance able to address the political cleavages deriving from globalization. The persistent necessity to renew that balance implies that government intervention and cross-border barriers move together in the long run. The second hypothesis assumes that, although both policies under scrutiny can be adopted to protect the groups most damaged by global markets, they do not move together. This is essentially because the decision-making of these two protective solutions are too distant to construct and restore any protective balance. In order to test the two hypotheses, a battery of cointegration tests was estimated on a panel dataset composed of 20 OECD countries observed over the 1970-2009 period. These tests clearly indicate that government spending and cross-border barriers are not cointegrated and do not track together over time.

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