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Relative government size in globalization and its welfare implications

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As globalization spreads across the world, countries are experiencing growing competitive pressure in many fields. Since the role of government is needed to change in this global era, the so-called government-size debate has become fierce. This article provides a measure of relative government size in globalization, and clarifies the welfare effect of relative government size in globalization applying a simplified dynamic utility theoretical approach. The main finding is that there is no systematic relationship between relative government size and relative welfare in globalization; such relation depends on behavioural parameters such as the elasticity of inter-temporal substitution of consumption and the disutility of labour. This result suggests that finding prerequisites for government consumption to play a welfare-improving role in globalization is more beneficial than the government-size debate.

Document Type: Research Article


Affiliations: Department of International Trade, Hansung University, Korea 136-792

Publication date: 2010-04-01

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