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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 US county level data (3,058 observations) from 1970 to 1998 to explore the relationship between economic growth and the extent of government employment at three levels: federal, state and local. We find that increases in federal, state and local government employments are all negatively associated with economic growth. We find no evidence that government is more efficient at lower levels. While we cannot separate out the productive and redistributive services of government, we document that the county-level income distribution became slightly more unequal from 1970 to 1998. For those who justify government activities in terms of equity concerns – perhaps even trading off economic growth for equity – the burden falls on them to show that the income distribution would have widened more in the absence of government activities. We conclude 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 13094.

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Date of creation: 29 Jan 2009
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Handle: RePEc:pra:mprapa:13094

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Related research
Keywords: Economic Growth; Federal Government; State Government; Local Government; County-Level Data; Metro and Non-Metro Counties; Income Distribution; Equity;

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Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Regional, Urban, and Rural Analyses
H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
O51 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes

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