Advanced Search
MyIDEAS: Login to save this article or follow this journal

Growth and the public sector: a critique of the critics

Contents:

Author Info

  • Folster, Stefan
  • Henrekson, Magnus

Abstract

In a recent review article Jonas Agell, Thomas Lindh and Henry Ohlsson (1997) claim that theoretical and empirical evidence does not allow any conclusion on whether there is a relationship between the rate of economic growth and the size of the public sector. They illustrate their conclusion with simple cross-country regressions where the relation between growth and public expenditure tilts from negative to positive when control variables are introduced. In our article we argue that Agell, Lindh and Ohlsson base their conclusion on empirical studies, and on their own regressions, without evaluating the econometric problems that arize. We extend Agell et al.'s review in order to highlight some of these problems. Furthermore, we present evidence showing that once a number of econometric issues are dealt with the relationship between growth and public expenditure may be more robustly negative than it first appears.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6V97-3WRBNK7-C/2/787c01d9ad0e57f80020d50b6c8a6a5e
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 15 (1999)
Issue (Month): 2 (June)
Pages: 337-358

as in new window
Handle: RePEc:eee:poleco:v:15:y:1999:i:2:p:337-358

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505544

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Barro, R.J. & Mankiw, N.G. & Sala-i-Martin, X., 1992. "Capital Mobility in Neoclassical Models of Growth," Papers 655, Yale - Economic Growth Center.
  2. Mendoza, Enrique G. & Milesi-Ferretti, Gian Maria & Asea, Patrick, 1997. "On the ineffectiveness of tax policy in altering long-run growth: Harberger's superneutrality conjecture," Journal of Public Economics, Elsevier, vol. 66(1), pages 99-126, October.
  3. Holmes, James M & Hutton, Patricia A, 1990. "On the Causal Relationship between Government Expenditures and National Income," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 87-95, February.
  4. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  5. Martin Feldstein, 1995. "Social Security and Saving: New Time Series Evidence," NBER Working Papers 5054, National Bureau of Economic Research, Inc.
  6. Robert J. Barro, 1991. "A Cross-Country Study of Growth, Saving, and Government," NBER Chapters, in: National Saving and Economic Performance, pages 271-304 National Bureau of Economic Research, Inc.
  7. de la Fuente, A., 1997. "Fiscal policy and Growth in The OECD. Volume II: Appendix," UFAE and IAE Working Papers 401.97, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  8. Glenn R. Hubbard & Jonathan Skinner & Stephen P. Zeldes, . "Precautionary Saving and Social Insurance," Rodney L. White Center for Financial Research Working Papers 3-95, Wharton School Rodney L. White Center for Financial Research.
  9. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, December.
  10. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
  11. Sebastian Edwards, 1995. "Why are Saving Rates so Different Across Countries?: An International Comparative Analysis," NBER Working Papers 5097, National Bureau of Economic Research, Inc.
  12. Hansson, Par & Henrekson, Magnus, 1994. " A New Framework for Testing the Effect of Government Spending on Growth and Productivity," Public Choice, Springer, vol. 81(3-4), pages 381-401, December.
  13. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  14. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  15. King, R.G. & Rebelo, S., 1988. "Public Policy And Economic Growth: Developing Neoclassical Implications," RCER Working Papers 225, University of Rochester - Center for Economic Research (RCER).
  16. Abramovitz, Moses, 1986. "Catching Up, Forging Ahead, and Falling Behind," The Journal of Economic History, Cambridge University Press, vol. 46(02), pages 385-406, June.
  17. Feldstein, Martin, 1996. "The Missing Piece in Policy Analysis: Social Security Reform," American Economic Review, American Economic Association, vol. 86(2), pages 1-14, May.
  18. Carr, Jack L, 1989. "Government Size and Economic Growth: A New Framework and Some Evidence from Cross-Section and Time-Series Data: Comment," American Economic Review, American Economic Association, vol. 79(1), pages 267-71, March.
  19. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  20. Eric M. Engen & Jonathan Gruber, 1995. "Unemployment Insurance and Precautionary Saving," NBER Working Papers 5252, National Bureau of Economic Research, Inc.
  21. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  22. de la Fuente, Angel, 1997. "Fiscal Policy and Growth in the OECD," CEPR Discussion Papers 1755, C.E.P.R. Discussion Papers.
  23. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May.
  24. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc.
  25. Bergstrom, Villy (ed.), 1997. "Government and Growth," OUP Catalogue, Oxford University Press, number 9780198290377, October.
  26. Plosser, Charles I., 1992. "The search for growth," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 57-86.
  27. Lindh, Thomas & Ohlsson, Henry, 1998. "Self-Employment and Wealth Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(1), pages 25-42, March.
  28. Xavier Sala-i-Martin, 1994. "Cross-sectional regressions and the empirics of economic growth," Economics Working Papers 79, Department of Economics and Business, Universitat Pompeu Fabra.
  29. Saint-Paul, G., 1991. "Fiscal Policy In An Endogenous Growth Model," DELTA Working Papers 91-04, DELTA (Ecole normale supérieure).
  30. Vito Tanzi & Howell H. Zee, 1996. "Fiscal Policy and Long-Run Growth," IMF Working Papers 96/119, International Monetary Fund.
  31. Atkinson, Anthony B., 1995. "The Welfare State and Economic Performance," National Tax Journal, National Tax Association, vol. 48(2), pages 171-98, June.
  32. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  33. Robert J. Barro & Paul M. Romer, 1991. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr91-1.
    • Robert J. Barro & Paul Romer, 1993. "Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number barr93-1.
  34. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  35. B. Douglas Bernheim & John B. Shoven, 1991. "National Saving and Economic Performance," NBER Books, National Bureau of Economic Research, Inc, number bern91-2.
  36. Ohlsson, H. & Agell, J. & Lindh, T., 1995. "Growth and the Public Sector: A Critical Review Essay," Papers 1995-09, Uppsala - Working Paper Series.
  37. Larry E. Jones & Rodolfo E. Manuelli & Peter E. Rossi, 1993. "On the Optimal Taxation of Capital Income," NBER Working Papers 4525, National Bureau of Economic Research, Inc.
  38. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-83, May.
  39. Rao, V V Bhanoji, 1989. "Government Size and Economic Growth: A New Framework and Some Evidence from Cross-Section and Time-Series Data: Comment," American Economic Review, American Economic Association, vol. 79(1), pages 272-80, March.
  40. Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
  41. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  42. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  43. Conte, Michael A & Darrat, Ali F, 1988. "Economic Growth and the Expanding Public Sector: A Reexamination," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 322-30, May.
  44. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  45. 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.
  46. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-29, June.
  47. Joel Slemrod, 1995. "Involvement, Prosperity, and Economic Growth?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 373-431.
  48. Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 485-517, June.
  49. Xavier Sala-i-Martin, 1995. "Transfers, social safety nets and economic growth," Economics Working Papers 139, Department of Economics and Business, Universitat Pompeu Fabra.
  50. A. W. Coats, 1995. "Comment," History of Political Economy, Duke University Press, vol. 27(5), pages 157-161, Supplemen.
  51. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
  52. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:poleco:v:15:y:1999:i:2:p:337-358. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.