THE EFFECT OF TRADE AND FINANCIAL-OPENNESS ON GOVERNMENT SIZE: A CASE STUDY FOR MENA

This paper concentrates on the relationship between trade openness, financial openness and government size concerning the Middle East and North African countries (MENA). Compensation hypothesis explains that trade-openness is positively interconnected with the government size. Also, financial openness has negative relationship with the government size. Using panel data for MENA countries during 2000-2007, we have found evidence of a positive relationship between trade-openness and government size and also a negative relationship between financial openness and the size of government.