The Effect of Government Size on the Steady-State Unemployment Rate: A Structural Error Correction Model
AbstractIn this paper, we investigate the relationship between government size and the unemployment rate using a structural error correction model that describes both the short-run dynamics and long-run determination of the unemployment rate. Using data from twenty OECD countries from 1970 to 1999, we find that government size, measured as total government outlays as a percentage of GDP, plays a significant role in affecting the steady-state unemployment rate. We disaggregate government outlays and find that transfers and subsidies significantly affect the steady-state unemployment rate while government expenditures on goods and services play no significant role.
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Bibliographic InfoPaper provided by University of Delaware, Department of Economics in its series Working Papers with number 06-05.
Length: 40 pages
Date of creation: 2006
Date of revision:
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Web page: http://www.lerner.udel.edu/departments/economics/department-economics/
More information through EDIRC
Steady-State Unemployment Rate; Government Size; Error Correction Model; Dynamic Panel Data Model; Arellano-Bond Estimator;
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- H10 - Public Economics - - Structure and Scope of Government - - - General
- H19 - Public Economics - - Structure and Scope of Government - - - Other
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
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