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Growth and the Public Sector: A Critique of the Critics Author info | Abstract | Publisher info | Download info | Related research | Statistics Fölster, Stefan (The Research Institute of Industrial Economics)
Henrekson, Magnus () (The Research Institute of Industrial Economics)
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In a recent review article Jonas Agell, Thomas Lindh and Henry Ohlsson (1997) claim that theoretical and empirical evidence does not allow any conclusion on whether there is a relationship between the rate of economic growth and the size of the public sector. They illustrate their conclusion with simple cross-country regressions where the relation between growth and public expenditure tilts from negative to positive when control variables are introduced. In our article we argue that Agell, Lindh and Ohlsson base their conclusion on empirical studies, and on their own regressions, without evaluating the econometric problems that arize. We extend Agell et al.'s review in order to highlight some of these problems. Furthermore, we present evidence showing that once a number of econometric issues are dealt with the relationship between growth and public expenditure may be more robustly negative than it first appears.
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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number
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Length: 23 pages
Date of creation: 01 Dec 1997Date of revision:
10 Jun 1998Publication status: Published in European Journal of Political Economy, 1999, pages 22.Handle: RePEc:hhs:iuiwop:0492Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden Phone: +46 8 665 4500 Fax: +46 8 665 4599 Email: Web page: http://www.ifn.se/ More information through EDIRC
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Keywords: Economic growth Government expenditure Public sector Taxation Cross-country regressions. Other versions of this item:
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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