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An Assessment of the Growth-Enhancing Size of Government in the Caribbean

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  • Alleyne, K.A.

    ()

  • Lewis-Bynoe, D.

    ()

  • Moore, W.

    ()

Abstract

Between 1990 and 1994, the average size of the public sector in the Caribbean was just 16 percent of GDP, in the five years hence, the ratio has climbed and currently stands at 22 percent of GDP. While an expansion in the size of government usually results in the greater provision of services, it can also lead to slower rates of growth because of greater bureaucracy and the crowding-out of private sector driven initiatives. Using a simple production function approach, this study provides an assessment of the growth-enhancing size of government in the Caribbean using annual observations for the period 1975 to 2002. The econometric results in the paper suggest that government services do positively influence growth, but only if the size of government is, on average, between 10 percent and 16 percent of total real value-added.

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Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

Volume (Year): 4 (2004)
Issue (Month): 3 ()
Pages:

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Handle: RePEc:eaa:aeinde:v:4:y:2004:i:1_21

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  1. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October.
  2. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
  3. Guseh, James S., 1997. "Government Size and Economic Growth in Developing Countries: A Political-Economy Framework," Journal of Macroeconomics, Elsevier, vol. 19(1), pages 175-192, January.
  4. Karras, Georgios, 1996. "The Optimal Government Size: Further International Evidence on the Productivity of Government Services," Economic Inquiry, Western Economic Association International, vol. 34(2), pages 193-203, April.
  5. Karras, Georgios, 1993. "Employment and Output Effects of Government Spending: Is Government Size Important?," Economic Inquiry, Western Economic Association International, vol. 31(3), pages 354-69, July.
  6. Karras, Georgios, 1997. "On the Optimal Government Size in Europe: Theory and Empirical Evidence," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(3), pages 280-94, June.
  7. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
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