Growth and the Public Sector: A reply
AbstractFölster 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 Fölster 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 University, Department of Economics in its series Working Paper Series with number 1999:1.
Length: 10 pages
Date of creation: 19 Dec 1998
Date of revision:
Publication status: Published in European Journal of Political Economy, 1999, pages 359-366.
Contact details of provider:
Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
More information through EDIRC
economic growth; public sector; taxation; government expenditure; cross-country regressons;
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
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-01-25 (All new papers)
- NEP-PBE-1999-01-25 (Public Economics)
- NEP-PKE-1999-02-15 (Post Keynesian Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Agell, Jonas & Lindh, Thomas & Ohlsson, Henry, 1997.
"Growth and the public sector: A critical review essay,"
European Journal of Political Economy,
Elsevier, vol. 13(1), pages 33-52, February.
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"On the Ineffectiveness of Tax Policy in Altering Long- Run Growth: Harberger's Superneutrality Conjecture,"
CEPR Discussion Papers
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