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Research Article

Economic globalization and fiscal performance

, &
Pages 2348-2354 | Published online: 13 Jul 2022
 

ABSTRACT

This study attempts to assess the heterogeneous impact of economic globalization on fiscal performance in 77 countries over the period 1995–2017. We find that for high-income countries, trade globalization will increase their government expenditure, but financial globalization is conducive to increasing their revenue. For low-income countries, economic globalization will help to save their government expenditure, thereby improving their fiscal performance. For emerging countries, while economic globalization increases both government expenditure and revenue, the combined effect is not conducive to their good fiscal performance.

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Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Please refer to https://kof.ethz.ch/en/data.html for more details.

3 These variables have used the indicators of ‘revenue, exclusive grants (% of GDP)’, ‘Expense (% of GDP)’, and ‘Central government debt, total (% of GDP)’ in the WDI database.

4 The full sample is divided into sub-samples of countries with different income levels (i.e. countries with the low-income level, countries with lower-middle-income, countries with upper-middle-income levels, and countries with high-income levels.) according to the World Bank’s classification criteria. The emerging countries are countries whose average GDP growth rate over the recent five years in the estimated period falls into the top 10% of the full sample.

5 This paper used the first-order differential IV approach referring the article of Anderson and Hisao (Citation1982), which firstly used the first difference of Equationequation (1) to eliminate the individual effect, and then the performanceit3 and performance lagged more period are used as instruments for D. performanceit1.

6 We also include the indicators of education and financial market supervision into EquationEquation (1) and then re-run the regression. The results are robustness.

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