Kiel Working Papers, Kiel Institute for World Economics
No 1726:
Varieties of Capitalism, Governance and Government Spending – A Cross-Section Analysis
Joachim Ahrens, Rainer Schweickert and Juliane Zenker
Abstract: We argue that the literature on government size suffers
from neglecting the role of governance both as a driving and a limiting
factor for government spending. Cross-country evidence for a sample of 126
developed and developing countries averaging data for the period 2003-07
reveals that better governance allows for higher spending. However, on the
demand side, more open countries are likely to spend more in cases of minor
quality of governance only. In this respect, government spending
compensates ineffective institutional structures. More generally, a
preference for a coordinated (continental European type) market economy
leads to higher levels of spending if accompanied by better governance.
While most developing countries share these preferences, Latin American
countries seem to prefer a lower level of spending as in liberal
(anglo-saxon) market economies
Keywords: Government Size, Governance, Varieties of Capitalism, OECD, Developing Countries; (follow links to similar papers)
JEL-Codes: H10,; P10,; P51; (follow links to similar papers)
21 pages, August 2011
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