GLOBALIZATION, DEMOCRACY AND SIZE OF GOVERNMENT: TESTING FOR EFFICIENCY AND COMPENSATION HYPOTHESES FOR NIGERIA
Keywords:
Globalization, democracy, size of government, efficiency and compensation hypothesesAbstract
The relationship between globalization and government size is examined under the efficiency and compensation hypotheses in the literature. This study tests the extent to which the compensation effect, as hypothesized for developed nations, is able to explain the relationship between globalization and public spending in Nigeria. It also investigates the role of democratic regime in the globalization-government size. The study employed a new globalization index as a measure of globalization adapted from the KOF index proposed by Dreher (2006) and revised by Gygli, Haelg, Potrafke & Sturm (2018). Using annual dataset covering the period 1970-2017, the study applied ordinary least squares (OLS) with heteroscedasticity-robust standard errors as estimation technique. Using economic and overall index of globalization, the study favours the compensation hypothesis while social globalization and government size supports the efficiency hypothesis.
References
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Porto, A., Porto, N., & Garbero, N. (2016). The impact of globalization on subnational expenditures: Efficiency and compensation effects. Journal of Finance and Economics, 4(2), 1-22. http://dx.doi.org/10.12735/jfe.v4n2p01
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Rudra, N. (2002). Globalization and the Decline of the Welfare State in Less-Developed Countries. International Organization 56 (Spring): 411-428.
Saahdong, C. I. (2010). The Relationship between Globalization and Public Spending: Empirical evidence from the Nordic Countries. Master Thesis, Lund University
Sener, S. Bayrakdar, B. & Hacioglu, V. (2015). The Analysis for the Validity of Compensation and Efficiency Hypotheses in Turkey between 1975 and 2013. Procedia - Social and Behavioral Sciences 195: 624 – 631
Walter, S. (2010). Globalization and the Welfare State: Testing the Microfoundations of the Compensation Hypothesis. International Studies Quarterly 54(2):403–26.
Wood, A. (1994). North-South Trade, Employment and Inequality. New York: Oxford University Press.
World Development Indicators, WDI (2018)
Adebayo, T. O. & Olawale, K. O. (2018). Openness and government size: The compensation and efficiency hypotheses considered for Nigeria. E3 Journal of Business Management and Economics, 9(1), 12-21
Adserà, A.& C. Boix, (2002): Trade, Democracy and the Size of the Public Sector: The Political Underpinnings of Openness, International Organization, 56: 229-262.
Aidt, T. S., and Eterovic, D. S. (2011). Political competition, electoral participation and public finance in 20th century Latin America. European Journal of Political Economy 27, 181–200.
Aidt, T. S., Dutta, J. and Dauntan, M. (2010). The retrenchment hypothesis and the extension of the franchise in England and Wales. The Economic Journal 120, 990–1020.\
Bayat, T., Tasat, I. & Kayhab, S. (2017). The validity of efficiency and compensation hypothesis for G7 countries. Ecoforum, 6 Issue 2(11)
Bittencourt, M. (2013).Young Democracies and Government Size: Evidence from South America. Economic Research Southern Africa (ERSA) working paper 329.
Dallinger, U. (2013). Economic Openness and Domestic Demand for Social Protection: A Multi-Level Analysis of Social Security Preferences between 1990 and 2006. Comparative Sociology 12(5):585–616.
Dallinger, U. 2014. Globalization and Demand for Social Security: A Critical Examination of the Domestic Demand Approach. Berliner Journal fur Soziologie 24(1):59–88.
Dixit, V. (2014). Relation between Trade Openness, Capital Openness and Government Size in India: An Application of Bounds Testing-ARDL Approach to Co- integration. Foreign Trade Review, 49(1) 1–29
Dizaji, S. F., Farzanegan, M. R. and Naghavi, A. (2014). Political Institutions and Government Spending Behavior: Theory and Evidence from Iran. Quaderni - Working Paper DSE No. 986.
Dreher, A. (2006). Does globalization affect growth? Evidence from a new index of globalization. Applied Economics 38(10), 1091-1110
Dreher, A., Gaston, N., & Martens, P. (2008). Measuring globalisation: Gauging its consequences. Springer Science and Business Media.
Dreher, A., Jan-E, S, & Ursprang, H.W. (2008). The impact of globalization on composition of Government expenditures: Evidence from panel data, Public Choice 134:263-292
Dreher, A., Sturm, J & Ursprung, H. W. (2006). The impact of globalization on the composition of government expenditures: Evidence from panel data. CESifo Working Paper No. 1755. https://www.cesifo-group.de/DocDL/cesifo1_wp1755.pdf
Garret, G. (1999). Globalization and government spending around the world. A paper presented at the 1999 Annual Meetings of the American Political Science Association, Atlanta GA, September 1-5.
Garrett, G. & Mitchell, D. (2001). Globalization, government spending and Taxation in OECD. European Journal of Political Research 39:145-177.
Garrett, G. (1998). Global Markets and National Politics: Collision Course or Virtuous Circle? International Organization 52: 787-824.
Gemmell N., Kneller R.Y & Sanz I. (2006): Globalization and the composition of Government Spending, An analysis for OECD countries. Foundation of Spanish saving banks (FUNCAS), working paper 289.
Gygli, S., Haelg, F., Potrafke, N. & Sturm, J. (2018). The KOF Globalisation Index - Revisited. Review of International Organizations, https://doi.org/10.1007s11558-019-09344-2
Hausken, K., Martin, C.W. and Plümper, T. (2004). Government spending and taxation in democracies and autocracies. Constitutional Political Economy 15, 239–259.
Hualde, J. (2006). Unbalanced Cointegration. Econometric Theory, 22(5), 765-814.
Jeong, H. (2010). Globalization and the Politics of the Welfare State. Ph.D. dissertation, University of Kentucky.
Katumba, O. S. (2013). “Globalization and Government Size: Adopting the Mean Group
Estimator Model.” An Unpublished M.Sc Thesis.
Kittel, B. & Winner, H. (2005). How reliable is pooled analysis in political economy? The. Globalization welfare state nexus revisited. European Journal of Political Research, 44(2), 263-293
Plümper, T. & Martin, C. W. (2003). Deocracy, government spending and economic growth: A political-econoic explanation of the Barro-effect. Public Choice 117: 27-50
Porto, A., Porto, N. & Garbero, N. (2016). The Impact of Globalization on Subnational Expenditures: Efficiency and Compensation Effects. Journal of Finance and Economics, 4(2):1-22
Porto, A., Porto, N., & Garbero, N. (2016). The impact of globalization on subnational expenditures: Efficiency and compensation effects. Journal of Finance and Economics, 4(2), 1-22. http://dx.doi.org/10.12735/jfe.v4n2p01
Ricardo, D. (1817). On the Principles of Political Economy and Taxation. Ed. John Murray. London.
Rodrik, D. (1997). Has Globalization Gone Too Far? Washington, DC: Institute for International Economics.
Rudra, N. (2002). Globalization and the Decline of the Welfare State in Less-Developed Countries. International Organization 56 (Spring): 411-428.
Saahdong, C. I. (2010). The Relationship between Globalization and Public Spending: Empirical evidence from the Nordic Countries. Master Thesis, Lund University
Sener, S. Bayrakdar, B. & Hacioglu, V. (2015). The Analysis for the Validity of Compensation and Efficiency Hypotheses in Turkey between 1975 and 2013. Procedia - Social and Behavioral Sciences 195: 624 – 631
Walter, S. (2010). Globalization and the Welfare State: Testing the Microfoundations of the Compensation Hypothesis. International Studies Quarterly 54(2):403–26.
Wood, A. (1994). North-South Trade, Employment and Inequality. New York: Oxford University Press.
World Development Indicators, WDI (2018)
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2020-06-30
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GLOBALIZATION, DEMOCRACY AND SIZE OF GOVERNMENT: TESTING FOR EFFICIENCY AND COMPENSATION HYPOTHESES FOR NIGERIA. (2020). Timisoara Journal of Economics and Business, 13(1), 1-14. https://www.tjeb.ro/index.php/tjeb/article/view/334
