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Federal, State, and Local Governments: Evaluating their Separate Roles in US Growth

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Author Info
Higgins, Matthew
Young, Andrew
Levy, Daniel

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Abstract

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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1014.

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Date of creation: 03 Nov 2006
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Handle: RePEc:pra:mprapa:1014

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Related research
Keywords: Economic Growth; Federal Government; State Government; Local Government; and County-Level Data;

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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

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  6. Higgins, Matthew & Young, Andrew & Levy, Daniel, 2007. "Robust Correlates of County-Level Growth in the U.S," MPRA Paper 3088, University Library of Munich, Germany. [Downloadable!]
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  7. Xavier Sala-i-Martin, 1997. "I just Ran Four Million Regressions," Economics Working Papers 201, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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  12. Garcia-Mila, Teresa & McGuire, Therese J & Porter, Robert H, 1996. "The Effect of Public Capital in State-Level Production Functions Reconsidered," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 177-80, February. [Downloadable!] (restricted)
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  17. Matthew Higgins & Daniel Levy & Andrew Young, 2003. "Growth and Convergence across the US: Evidence from County-Level Data," Emory Economics 0306, Department of Economics, Emory University (Atlanta). [Downloadable!]
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