Trade openness and government size : evidence for six countries in the Asia-Pacific

• Main Author: SABAL, JHON LOUIE
• Format: text
• Published: Archīum Ateneo 2018
• Subjects: International trade; Free trade > Asia; Free trade > Pacific Area; Economic development > Pacific Area; Economic development > Asia; Economic indicators; Pacific Area > Commercial policy; Asia > Commercial policy; Pacific Area > Economic policy; Asia > Economic policy.
• Online Access: https://archium.ateneo.edu/theses-dissertations/177; http://rizalls.lib.admu.edu.ph/#section=resource&resourceid=1503079920&currentIndex=0&view=fullDetailsDetailsTab
• Institution: Ateneo De Manila University

The purpose of study is to determine a positive correlation between trade openness and government size. It presents evidence for six countries in the Asia-Pacific for the period of 1985 to 2015. The methods of Newey-West and two-stage least square (2SLS) are the final estimation techniques. The results show that trade is positive and statistically significant to government size in the Philippines, Singapore, and South Korea. Greater intervention of government in terms of liberalization and safety net programs coupled with stable government institutions are present in the Philippines, Singapore, and South Korea. Meanwhile, countries that support the trickle-down and free-market principles show a negative and statistically significant relationship between trade openness and government size like in Indonesia and Malaysia. Their governments implement liberalization strategies that are anchored on the idea that a government is a facilitator of free-market principles and that the market system is the sole engine of growth. Lastly, the results show a positive but statistically not significant relationship between trade openness and government size in Peru. The Peruvian government is plagued by socio-political instability and several fiscal challenges that the country ultimately fails to benefit from trade openness.