There is a vast empirical literature investigating the relationship between government size and economic growth. But the empirical evidence of growth effects of public expenditure using cross-country regressions is still inconclusive. According to a number of authors this is not surprising since the negative relationship only applies for rich countries with a large public sector. Restricting their analysis on rich countries only they can show the predicted negative impact. Naturally, a selection of a sub-sample of rich countries is always somewhat arbitrary. Another possibility is to concentrate on governments within a rich country. However, only few studies investigate the effect of state and local spending on economic growth. This study concentrates on the relationship between public expenditure and economic growth within a rich country using the full sample of state and local governments from Switzerland over the 1981--2001 period. The general finding is a fairly robust negative relationship between government size and economic growth. However, in contrast to public spending from operating budgets there is no significant impact on economic growth by expenditure from capital budgets.
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Article provided by Taylor and Francis Journals in its journal Applied Economics.
Volume (Year): 38 (2006) Issue (Month): 10 (June) Pages: 1181-1192 Download reference. The following formats are available: HTML
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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.:
Jordan Rappaport, 1999.
"Local Growth Empirics,"
CID Working Papers
23, Center for International Development at Harvard University.
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