Globalization and Government Size: Rodrik Hypothesis Testing

According to the Rodrik theory (1998) under the Rodrik hypothesis, economic globalization can increase the government size. In this context, this article tries to presents a conceptual model of the factors affecting the government size and it empirical test through panel cointegration analysis with cross-sectional dependency and continuously-updated and fully-modified method (Cup-FM) (proposed by Bai et al (2009)) by using data from 8 developing and islamic countries in D8 group, review relationship between economic globalization and government size. For this purpose, is used the economic aspects of KOF globalization as an indicator of economic globalization. These aspects include the actual flows of trade, including trade, foreign direct investment and portfolio investment and trade barriers such as tariffs and restrictions on real flows. The results show a positive impact of economic globalization on the government size and thus confirm the Roderick hypotheses for the countries studied. Other results of this study indicate a positive and significant influence on the government size of GDP per capita (confirmed the Wagner’s low) and democracy net and it negative influence of degree of urbanization.