A number of cross-country comparisons do not find a robust negative relationship between government size and economic growth. In part this may reflect the prediction in economic theory that a negative relationship should exist primarily for rich countries with large public sectors. In this paper an econometric panel study is conducted on a sample of rich countries covering the 1970-95 period. Extended extreme bounds analyses are reported based on a regression model that tackles a number of econometric issues. Our general finding is that the more econometric problems are addressed, the more robust the relationship between government size and economic growth appears. Our most complete specifications are robust even according to the stringent extreme bounds criterion.
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Length: 18 pages Date of creation: 20 Jun 2000 Date of revision: Publication status: Published in European Economic Review, 2001, pages 1501-1520. Handle: RePEc:hhs:hastef:0391
Note: Published in the European Economic Review, 2001 Contact details of provider: Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden Phone: +46-(0)8-736 90 00 Fax: +46-(0)8-31 01 57 Email: Web page: http://www.hhs.se/ More information through EDIRC
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Find related papers by JEL classification: 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 O23 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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