Anca Gabriela Ilie

Latin America and the Challenges of Globalisation

The main objective of this paper is to see how economic globalisation has affected the size of the state in Latin America, determining which of the effects – efficiency and compensation – has been stronger in Latin America, a region that has joined the world economy gradually since the 1980s, with diverse experiences. In absolute terms, however, the state was more present in the economy in 2011 than in 2000 or 1980, helping reduce inequality, meaning that the compensation effect may exist, despite the analysis showing an ambiguous result. The results are generally confirmed by the quantitative analysis, with multiple linear crosssectional regressions and panel regression (with and without outliers) showing that indeed openness to trade, measured either through tariffs or through trade as share of GDP, is associated with a smaller state, with a (reliable) tariff coefficient. Our work in mainly conceived as a theoretical research grounded on statistical data. The conclusions of the case study point towards the existence of the efficiency effect, with growing trade associated with a smaller relative presence of the state in the economy. Globalisation does slightly reduce the size and the scope of the state in Latin America, but there is “an alternative view, based on global social justice and a balanced role for the government and the market.