On the relationship between trade openness and government size

Does trade openness systematically imply bigger governments, as proposed by Rodrik (Journal of Political Economy, 106, 997 and 1998)? This paper presents a novel more refined explanation for when why international may enlarge the public sector. We propose that is associated with governments via compensation pathway if i $$ (i) price volatility country's export basket substantial ii (ii) country democratic. The first condition satisfies prior introduces uncertainty external risk. second ensures people's desire greater economic security can be realised through government spending. Empirical evidence 137 countries, account approximately 95% world population, from 2000–2016 consistent this hypothesis. Exploring areas spending, we find intuitive patterns. Consistent hypothesis, spending on affairs housing increases significantly openness, whereas education, health care, military not affected. As our general result, only case in democracies are subject to high global market.