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The Optimal Government Size: Further International Evidence on the Productivity of Government Services

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  • Karras, Georgios

Abstract

This paper estimates the optimal government size for several sets of economies by investigating the role of public services in the production process. The author assumes government services are optimally provided when their marginal product equals unity (the 'Barro rule'). The empirical results suggest that government services are significantly productive; they are over provided in Africa, under provided in Asia, and optimally provided everywhere else; the optimal government size is 23 percent for the average country but ranges from 14 percent for the average OECD country to 33 percent in South America; and the marginal productivity of government services is negatively related to government size. Copyright 1996 by Oxford University Press.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 34 (1996)
Issue (Month): 2 (April)
Pages: 193-203

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Handle: RePEc:oup:ecinqu:v:34:y:1996:i:2:p:193-203

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Cited by:
  1. Estache, Antonio & Gonzalez, Marianela & Trujillo,Lourdes, 2007. "Government expenditures on education, health, and infrastructure : a naive look at levels, outcomes, and efficiency," Policy Research Working Paper Series 4219, The World Bank.
  2. Romano Piras, 2004. "Growth, Congestion of Public Goods, and Second-Best Optimal Policy," Working Papers 2004.5, Fondazione Eni Enrico Mattei.
  3. Gupta, Sanjeev & Verhoeven, Marijn, 2001. "The efficiency of government expenditure: experiences from Africa," Journal of Policy Modeling, Elsevier, vol. 23(4), pages 433-467, May.
  4. François Facchini & Mickaël Melki, 2011. "Optimal Government Size and Economic Growth in France (1871-2008): An explanation by the State and Market Failures," Documents de travail du Centre d'Economie de la Sorbonne 11077, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  5. Ayal, Eliezer B. & Karras, Georgios, 1996. "Bureaucracy, investment, and growth," Economics Letters, Elsevier, vol. 51(2), pages 233-239, May.
  6. Mueller, Dennis C. & Stratmann, Thomas, 2003. "The economic effects of democratic participation," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2129-2155, September.
  7. Barbara M. Fraumeni & Marshall B. Reinsdorf & Brooks B. Robinson & Matthew P. Williams, 2009. "Price and Real Output Measures for the Education Function of Government: Exploratory Estimates for Primary and Secondary Education," NBER Chapters, in: Price Index Concepts and Measurement, pages 373-403 National Bureau of Economic Research, Inc.
  8. Mukherjee, Anit N., 2007. "Public expenditure on education: A review of selected issues and evidence," Working Papers hd1, National Institute of Public Finance and Policy.
  9. Dibeh, Ghassan, 2008. "Resources and the Political Economy of State Fragility in Conflict States: Iraq and Somalia," Working Paper Series RP2008/35, World Institute for Development Economic Research (UNU-WIDER).
  10. Hassan Aly & Mark Strazicich, 2000. "Is Government Size Optimal in the Gulf Countries of the Middle East? An empirical investigation," International Review of Applied Economics, Taylor & Francis Journals, vol. 14(4), pages 475-483.
  11. J. Stephen Ferris, 2010. "Fiscal Policy from a Public Choice Perspective," Carleton Economic Papers 10-10, Carleton University, Department of Economics.
  12. Benos, Nikos, 2009. "Fiscal policy and economic growth: empirical evidence from EU countries," MPRA Paper 19174, University Library of Munich, Germany.
  13. Dzhumashev, Ratbek, 2014. "Corruption and growth: The role of governance, public spending, and economic development," Economic Modelling, Elsevier, vol. 37(C), pages 202-215.
  14. Dudley, Leonard & Montmarquette, Claude, 1999. "Le secteur public : moteur de croissance ou obstruction à l’industrie?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 75(1), pages 357-377, mars-juin.
  15. Barbara M. Fraumeni & Marshall B. Reinsdorf & Brooks B. Robinson & Matthew P. Williams, 2008. "Price and Real Output Measures for the Education Function of Government: Exploratory Estimates for Primary & Secondary Education," NBER Working Papers 14099, National Bureau of Economic Research, Inc.
  16. Anwar, Sajid, 2005. "Specialisation-based external economies, supply of primary factors and government size," Journal of Economics and Business, Elsevier, vol. 57(3), pages 259-271.
  17. Alleyne, K.A. & Lewis-Bynoe, D. & Moore, W., 2004. "An Assessment of the Growth-Enhancing Size of Government in the Caribbean," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 4(3).

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