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Does public sector efficiency matter? Revisiting the relation between fiscal size and economic growth in a world sample

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  • Konstantinos Angelopoulos
  • Apostolis Philippopoulos

    ()

  • Efthymios Tsionas

Abstract

This paper revisits the relationship between fiscal size and economic growth. Our work differs from the empirical growth literature because this relationship depends explicitly on the efficiency of the public sector. We use a sample of 64 countries, both developed and developing, in four 5-year time-periods over 1980-2000. Building on the work of Afonso, Schuknecht and Tanzi (2005), we construct a measure of public sector efficiency in each country and each time-period by calculating an output to input ratio. In addition, we get an estimate of technical efficiency of public spending for 52 countries for the time-period 1995-2000 by employing a stochastic frontier analysis. Using these two measures, we find evidence of a non-monotonic relation between fiscal size and economic growth that depends critically on government efficiency.

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

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Bibliographic Info

Article provided by Springer in its journal Public Choice.

Volume (Year): 137 (2008)
Issue (Month): 1 (October)
Pages: 245-278

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Handle: RePEc:kap:pubcho:v:137:y:2008:i:1:p:245-278

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Web page: http://www.springerlink.com/link.asp?id=100332

Related research

Keywords: Fiscal policy; Government efficiency; Growth; H1; E6; 04;

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References

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  1. James Gwartney & Randal Holcombe & Robert Lawson, 1998. "The Scope of Government and the Wealth of Nations," Cato Journal, Cato Journal, Cato Institute, vol. 18(2), pages 163-190, Fall.
  2. Fölster, Stefan & Henrekson, Magnus, 1998. "Growth Effects of Government Expenditure and Taxation in Rich Countries," Working Paper Series 503, Research Institute of Industrial Economics, revised 20 Jun 2000.
  3. António Afonso & Ludger Schuknecht & Vito Tanzi, 2006. "Public Sector Efficiency: Evidence for New EU Member States and Emerging Markets," Working Papers Department of Economics 2006/01, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  4. Afonso, António & Schuknecht, Ludger & Tanzi, Vito, 2003. "Public sector efficiency: an international comparison," Working Paper Series 0242, European Central Bank.
  5. Hillman,Arye L., 2009. "Public Finance and Public Policy," Cambridge Books, Cambridge University Press, number 9780521738057, April.
  6. Jakob de Haan & Susanna Lundstroem & Jan-Egbert Sturm, 2005. "Market oriented institutions and policies and economic growth: A critical survey," TWI Research Paper Series 5, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
  7. Angelopoulos, Konstantinos & Economides, George & Kammas, Pantelis, 2007. "Tax-spending policies and economic growth: Theoretical predictions and evidence from the OECD," European Journal of Political Economy, Elsevier, vol. 23(4), pages 885-902, December.
  8. Dutt, Pushan & Mitra, Devashish, 2002. "Endogenous trade policy through majority voting: an empirical investigation," Journal of International Economics, Elsevier, vol. 58(1), pages 107-133, October.
  9. Agell, Jonas & Ohlsson, Henry & Thoursie, Peter Skogman, 2006. "Growth effects of government expenditure and taxation in rich countries: A comment," European Economic Review, Elsevier, vol. 50(1), pages 211-218, January.
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Citations

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Cited by:
  1. Eiji Yamamura, 2010. "Government size and trust," EERI Research Paper Series EERI_RP_2010_06, Economics and Econometrics Research Institute (EERI), Brussels.
  2. Jorge Martinez-Vazquez & Blanca Moreno-Dodson & VIoleta Vulovic, 2012. "The Impact of Tax and Expenditure Policies on Income Distribution: Evidence from a Large Panel of Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1225, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  3. F. Heylen & A. Hoebeeck & T. Buyse, 2011. "Fiscal consolidation, institutions and institutional reform: a multivariate analysis of public debt dynamics," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/763, Ghent University, Faculty of Economics and Business Administration.
  4. Heylen, Freddy & Hoebeeck, Annelies & Buyse, Tim, 2013. "Government efficiency, institutions, and the effects of fiscal consolidation on public debt," European Journal of Political Economy, Elsevier, vol. 31(C), pages 40-59.
  5. Daniel Oto-Peralías & Diego Romero-Ávila, 2013. "Tracing the Link between Government Size and Growth: The Role of Public Sector Quality," Kyklos, Wiley Blackwell, vol. 66(2), pages 229-255, 05.
  6. Sok-Gee Chan Mohd & Zaini Abd Karim, 2012. "Public Spending Efficiency And Political And Economic Factors: Evidence From Selected East Asian Countries," Economic Annals, Faculty of Economics, University of Belgrade, vol. 57(193), pages 7-24, April- Ju.
  7. repec:ebl:ecbull:v:15:y:2008:i:18:p:1-6 is not listed on IDEAS
  8. Adam, Antonis & Delis, Manthos D & Kammas, Pantelis, 2008. "Public sector efficiency: Leveling the playing field between OECD countries," MPRA Paper 16493, University Library of Munich, Germany.
  9. Konstantinos Angelopoulos & George Economides, 2008. "Fiscal policy, rent seeking, and growth under electoral uncertainty: theory and evidence from the OECD," Canadian Journal of Economics, Canadian Economics Association, vol. 41(4), pages 1375-1405, November.
  10. Yamamura, Eiji, 2010. "Public policy, trust and growth: disclosure of government information in Japan," MPRA Paper 27703, University Library of Munich, Germany.
  11. Antonis Adam & Manthos Delis & Pantelis Kammas, 2014. "Fiscal decentralization and public sector efficiency: evidence from OECD countries," Economics of Governance, Springer, vol. 15(1), pages 17-49, February.
  12. Yamamura, Eiji, 2009. "The influence of government size on economic growth and life satisfaction. A case study from Japan," MPRA Paper 17879, University Library of Munich, Germany.
  13. Joshua Hall & Robert Lawson, 2008. "Theory and evidence on economic freedom and economic growth: A comment," Economics Bulletin, AccessEcon, vol. 15(18), pages 1-6.

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