Growth and the Public Sector: a Reply
AbstractFvlster and Henrekson (1998) claim that they, by addressing a number of econometric problems, can establish that it is likely that economies with a large public sector grow more slowly than economies with a small public sector. But their regressions are fundamentally flawed. Re-estimating their growth equation using theoretically valid instruments, we find that the growth effect of the public sector is statistically insignificant, and much smaller than the point-estimates reported by Fvlster and Henrekson. This is consistent with the agnostic conclusion, drawn by us and many others, that cross-country growth regressions are unlikely to give a reliable answer to whether a large public sector is growth promoting or retarding.
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Bibliographic InfoPaper provided by Uppsala - Working Paper Series in its series Papers with number 1999:1.
Length: 10 pages
Date of creation: 1999
Date of revision:
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Postal: UPPSALA UNIVERSITY, DEPARTMENT OF ECONOMICS, S-751 20 UPPSALA SWEDEN.
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PUBLIC EXPENDITURES ; PUBLIC SECTOR ; ECONOMIC GROWTH;
Other versions of this item:
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
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