The effects of globalization on public expenditures, tax revenues, and public debt: An empirical evidence from the European Countries

Abstract

Globalization is a process that transcends national borders, integrates national economies, cultures, technologies, governance and generates complex affairs with interdependence. Considering the emergence of globalization, the way it spreads and its impact areas, economic, financial, political, cultural, technological, geographical, sociological, and ecological aspects are mentioned. In this study, the effect of globalization on public expenditures, tax revenues and public debt in 1995-2017 period for EU countries was investigated within the framework of compensation and efficiency hypotheses. Analysis results indicate that globalization has a negative effect on public expenditures, but a positive effect on tax revenues. Study results analyzing the effects of globalization in EU countries favour the efficiency hypothesis in terms of public expenditures and the compensation hypothesis in terms of tax revenues. In addition, although panel cointegration tests indicate a long-term relationship between globalization and public debt in EU countries, long-term coefficients are not statistically significant.