Growth effects of government expenditure and taxation in rich countries: A comment
AbstractIn a recent article Stefan FÃ¶lster and Magnus Henrekson  argue that ââ¦the more the econometric problems that are addressed, the more robust the relationship between government size and economic growth appearsâ. But in failing to control for simultaneity in a valid manner the regressions reported by FÃ¶lster/Henrekson are flawed. Moreover, using theoretically valid instruments we find that the estimated partial correlation between size of the public sector and economic growth is statistically insignificant and highly unstable across specifications. A policy-maker who wants to promote growth is well-advised to look for other evidence than cross-country growth regressions.
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Bibliographic InfoArticle provided by Elsevier in its journal European Economic Review.
Volume (Year): 50 (2006)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/eer
Other versions of this item:
- Agell, Jonas & Ohlsson, Henry & Skogman Thoursie, Peter, 2003. "Growth Effects of Government Expenditure and Taxation in Rich Countries: A Comment," Research Papers in Economics 2003:14, Stockholm University, Department of Economics.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
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