A regional analysis of openness and government size

Abstract

The effects of international trade have been studied primarily from the perspective of a nation, often overlooking the more direct effects that occur on a regional or state level. Studies have illustrated the relationship between international trade and openness to the size of a nation's government as well as to specific categories of government spending. Because the United States retains strong state governments it is important to correlate openness with government size at the state level. The purpose of this paper is to ascertain whether increased state openness has resulted in state governments responding to the increased international trade activity by offering greater social protection. It is found that both public welfare and health services expenditures are positively correlated with the level of a state's openness. This suggests that US states have had to respond to the adverse effects of increased international trade activity.