Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/85340
Authors: 
Erauskin, Iñaki
Year of Publication: 
2013
Citation: 
[Journal:] Economics: The Open-Access, Open-Assessment E-Journal [Volume:] 7 [Issue:] 2013-38 [Pages:] 1-56
Abstract: 
In this paper, we employ a portfolio approach based on a two-country world to study the impact of financial openness on the size of government and on other key economic variables, including the consumption-wealth ratio, the growth rate of wealth, and welfare (assuming that public spending is utility enhancing). The model suggests that the size of government, the consumption-wealth ratio, and welfare should be greater in an open economy because of higher productivity and/or less volatility because of risk sharing. The theoretical results for the growth rate depend on differences in productivity and in consumption-wealth ratios. The empirical evidence - based on a sample of 49 countries from 1970 to 2009-broadly supports the main theoretical results of the model.
Subjects: 
Financial openness
productivity
volatility
consumption-wealth ratio
growth
welfare
size of government
JEL: 
F41
F43
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/3.0/
Document Type: 
Article

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