We use new US county level data (3,058 observations) from 1970 to 1998 to explore the relationship between economic growth and the size of government at three levels: federal, state and local. Using 3SLS-IV estimation we find that the size of federal, state and local government all either negatively correlate with or are uncorrelated with economic growth. We find no evidence that government is more efficient at more or less decentralized levels. Furthermore, while we cannot separate out the productive and redistributive services of government, we document that the county-level income distribution became slightly wider from 1970 to 1998. Our findings suggest that a release of government-employed labor inputs to the private sector would be growth-enhancing.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
1014.
Find related papers by JEL classification: H50 - Public Economics - - National Government Expenditures and Related Policies - - - General O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes
This paper has been announced in the following NEP Reports: