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The literature has identified that countries with higher levels of openness tend to present a larger government sector as a way to reduce the risks to the economy that openness entails. This paper argues that there are a number of policies that can mitigate trade-induced risks, many of which do not have the necessary implication of increasing public spending. Yet, many such policies require governmental capabilities not available to any country. For that reason, the relationship between openness and the size of government might be mediated by the quality of its public sector. While countries with weak government capabilities will tend to rely on spending expansions to deal with trade-induced volatility, countries with stronger governmental capabilities might address such challenges by more efficient and less costly means. The empirical analysis in this paper shows that the effect of openness on government consumption is mediated by the quality of government institutions.
This paper contributes to an agenda that views the effects of policies and institutional reforms as dependent on the structure of political incentives for national and subnational political actors. The paper studies political incentive structures at the subnational level and the mechanisms whereby they affect national-level politics and policymaking at the national level in Argentina, a highly dec ... (View publication)
Merit-based selection of bureaucrats is central to state capacity building, yet rare in developing countries. Most executives instead favor patronage—political discretion—in public employment. This paper proposes and tests an original theory to explain when executives forsake patronage for merit. The theory exploits exogenous variation in the institutional design of patronage states. In some, ... (View publication)
This issue of IDEA was prepared by Steven Ambrus and Rita Funaro, and is based largely on research conducted at the IDB on governance issues. The articles presented in this newsletter are based on the research of Paulo Bastos, Paolo Buonanno, María Franco Chuaire, Daniel Gingerich, Enrique Kawamura, Sebastián Miller, Virginia Oliveros, Sebastián Saiegh, Carlos Scartascini, Christian Schuster, Jorg ... (View publication)
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