Journal of Finance and Economics

Journal of Finance and Economics

ISSN: 2291-4951 (Print)    ISSN: 2291-496X (Online)

Volume 4 (2016), No. 2, Pages 1-22

DOI: 10.12735/jfe.v4n2p01

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The Impact of Globalization on Subnational Expenditures: Efficiency and Compensation Effects

Alberto Porto1  Natalia Porto1  Noelia Garbero1 

1Departamento de Economía, Facultad de Ciencias Económicas- Universidad Nacional de La Plata, Buenos Aires, Argentina


To Cite this Article     Article Views: 768     Downloads: 426  Since deposited on 2016-07-12


The aim of this paper is to study the effects of economic openness and globalization on the structure of provincial government expenditures in Argentina. In particular, we are interested in the effects on social expenditures and its components, as an expression of the welfare state. Much of the existing literature has examined this relationship at the country level. This work contributes to this literature by extending analysis to the subnational sector. A dynamic panel data model is estimated using GMM – both in Differences and in Systems for the 24 jurisdictions of Argentina (23 provinces and the city of Buenos Aires) over the period 1993-2010. The paper includes a measure of globalization adapted from the KOF index proposed by Dreher (2006) which is estimated at the level of sub-national governments. Results indicate that economic openness and globalization have a negative impact on the participation of social expenditures. This is the expected result taking into account the “efficiency” effect versus the “compensation” effect.

JEL Classifications: H71, H72

Keywords: globalization, openness, social expenditures, sub-national governments

To Cite this Article: Porto, A., Porto, N., & Garbero, N. (2016). The impact of globalization on subnational expenditures: Efficiency and compensation effects. Journal of Finance and Economics, 4(2), 1-22.

Copyright © A. Porto, N. Porto, & N. Garbero

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This article is published under license to Science and Education Centre of North America. This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International License.

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The Impact of Globalization on Subnational Expenditures: Efficiency and Compensation Effects