Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76131
Authors: 
Year of Publication: 
2010
Series/Report no.: 
Working Paper No. 1004
Publisher: 
University of Zurich, Socioeconomic Institute, Zurich
Abstract: 
This paper investigates empirically the effect of import diversity on government size and provides evidence for the love of variety effect on government spending described in Hanslin (2008). I argue that crowding out of firms is an important cost of public good provision. However, due to the access to foreign varieties, national costs of public good provision are lower and therefore, public good provision is higher. Especially for OECD countries this channel seems to exist. The diversity of imported products has a positive effect on government consumption, particularly when these goods are classified as differentiated. In addition, this positive effect is decreasing in home market size. Further, the direct effect of the share of differentiated in total imported products on the government share is negative.
Subjects: 
international trade
trade openness
public expenditure
gains from variety
JEL: 
F10
H10
Document Type: 
Working Paper

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