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

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  • Higgins, Matthew
  • Young, Andrew
  • Levy, Daniel

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

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Cited by:
  1. Young, Andrew & Higgins, Matthew & Levy, Daniel, 2006. "Heterogeneous Convergence," MPRA Paper 954, University Library of Munich, Germany.
  2. Shanaka Herath, 2010. "The Size of the Government and Economic Growth: An Empirical Study of Sri Lanka," SRE-Disc, Institute for the Environment and Regional Development, Department of Socioeconomics, Vienna University of Economics and Business sre-disc-2010_05, Institute for the Environment and Regional Development, Department of Socioeconomics, Vienna University of Economics and Business.
  3. Shanaka Herath, 2012. "Size Of Government And Economic Growth: A Nonlinear Analysis," Economic Annals, Faculty of Economics, University of Belgrade, vol. 57(194), pages 7-30, July - Se.
  4. Jamie Bologna & Donald J. Lacombe & Andrew T. Young, 2014. "A Spatial Analysis of Incomes and Institutional Quality : Evidence from US Metropolitan Areas," Working Papers 14-11, Department of Economics, West Virginia University.

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