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The Scope of Government and its Impact on Economic Growth in OECD Countries

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  • Bernhard Heitger
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    Abstract

    This paper investigates the relationship between the size of government and economic growth in OECD countries in 1960–2000. The underlying idea is that government expenditures on public goods basically have a positive effect on growth, but this growth effect tends to decline or even reverse when government is overdoing, e.g. by increasing expenditures in such a way that it ultimately also provides private goods. Empirical analyses based on panel estimates for 21 OECD countries support this hypothesis: Total government expenditures as well as expenditures by type indicate a significant negative impact on economic growth (excepting transfers and public investments).

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    File URL: https://www.ifw-members.ifw-kiel.de/publications/the-scope-of-government-and-its-impact-on-economic-growth-in-oecd-countries/kap1034.pdf
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    Bibliographic Info

    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1034.

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    Length: 32 pages
    Date of creation: Apr 2001
    Date of revision:
    Handle: RePEc:kie:kieliw:1034

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    Related research

    Keywords: Government expenditure; taxation and economic growth;

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    References

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    1. Angel de la Fuente & Rafael Donénech, 2000. "Human Capital in Growth Regressions: How much Difference Does Data Quality Make?," OECD Economics Department Working Papers 262, OECD Publishing.
    2. Assar Lindbeck, 1997. "The Swedish Experiment," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1273-1319, September.
    3. James Gwartney & Randal Holcombe & Robert Lawson, 1998. "The Scope of Government and the Wealth of Nations," Cato Journal, Cato Journal, Cato Institute, vol. 18(2), pages 163-190, Fall.
    4. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Josheski, Dushko & Lazarov, Darko & Koteski, Cane, 2011. "Analysis of the optimal size of the government consumption," MPRA Paper 32983, University Library of Munich, Germany.
    2. Kamps, Christophe & Meier, Carsten-Patrick & Oskamp, Frank, 2004. "Wachstum des Produktionspotentials in Deutschland bleibt schwach," Kiel Discussion Papers 414, Kiel Institute for the World Economy (IfW).
    3. Scheide, Joachim, 2005. "Makroökonomie Theorie und wirtschaftspolitische Beratung," Open Access Publications from Kiel Institute for the World Economy 3761, Kiel Institute for the World Economy (IfW).
    4. Susana Martins & Francisco José Veiga, 2013. "Government size, composition of public expenditure, and economic development," NIPE Working Papers, NIPE - Universidade do Minho 17/2013, NIPE - Universidade do Minho.
    5. Heinz Handler & Andreas Knabe & Bertrand Koebel & Margit Schratzenstaller & Sven Wehke, 2005. "The Impact of Public Budgets on Overall Productivity Growth," WIFO Working Papers, WIFO 255, WIFO.
    6. Magazzino, Cosimo & Forte, Francesco, 2010. "Optimal size of government and economic growth in EU-27," MPRA Paper 26669, University Library of Munich, Germany.

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