AcademicArticleSCO_84984652063

abstract

• © 2016 Universidad Nacional Autónoma de México, Facultad de Contaduría y Administración We examine the relation between government size and economic openness employing a panel of the 32 Mexican states between 1996 and 2006. Making use of two alternative measures of capital and labor openness and employing alternative econometric specifications, we first find systematic positive effects of our openness measures on the size of states¿ total government spending. Thereafter, we focus on three subcategories of spending associated with social welfare: education, health and poverty alleviation. We find FDI flows are not statistically relevant determinants of social spending, but labor openness has a significant and greater impact on some of the aforementioned categories than on total spending.