Epifani, Paolo; Gancia, Gino - Department of Economics and Business, Universitat … - 2005
empirically. We show that openness can increase the size of governments through two channels: (1) a terms of trade externality … insurance is optimal. We show that large volumes of trade may result in welfare losses if the terms of trade externality is … between openness and the size of government and test whether it is consistent with the terms of trade externality or the …