Openness and Government Size in Sub-Saharan African countries

Using a panel dataset of 40 Sub-Saharan African (SSA) countries covering the period 1990-2015, through several panel data analysis, this study provide an empirical assessment of the relationship between openness and government size. To measure openness, trade openness, financial openness and globalization are used. Results of fixed effects model reveal that while trade openness confirms the evidence of the compensation hypothesis, financial openness and globalization are relevant to government size and confirm the efficiency hypothesis. The robustness of initial findings by the System Generalized Method of Moments (SGMM) estimations shows that trade openness has a significant positive effect on government size - supporting the compensation hypothesis-, while financial openness is negatively and significantly related to government size - supporting the efficiency hypothesis. In addition, globalization does not appear to have a significant effect on government size.