The bigger the better? Evidence of the effect of government size on life satisfaction around the world
Abstract
This paper empirically analyzes the question whether government involvement in the economy is conducive or detrimental to life satisfaction in a cross-section of 74 countries. This provides a test of a longstanding dispute between standard neoclassical economic theory, which predicts that government plays an unambiguously positive role for individuals’ quality of life, and public choice theory, that was developed to understand why governments often choose excessive involvement and regulation, thereby harming voters’ quality of life. Our results show that life satisfaction decreases with higher government spending. This negative impact of the government is stronger in countries with a leftwing median voter. It is alleviated by government effectiveness – but only in countries where the state sector is already small.Download Info
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Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 05/44.Length: 40 pages
Date of creation: Oct 2005
Date of revision:
Handle: RePEc:eth:wpswif:05-44
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Keywords: Life satisfaction; Government;Other versions of this item:
- Christian Bjørnskov & Axel Dreher & Justina Fischer, 2007. "The bigger the better? Evidence of the effect of government size on life satisfaction around the world," Public Choice, Springer, vol. 130(3), pages 267-292, March.
- NEP-ALL-2005-11-19 (All new papers)
- NEP-PBE-2005-11-19 (Public Economics)
- NEP-POL-2005-11-19 (Positive Political Economics)
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