The Effect of Federal Government Size on Long-Term Economic Growth in the United States, 1792-2004
AbstractIn this paper, we consider whether there is statistical evidence for a causal relationship between federal government expenditures and growth in real per-capita GDP in the United States, using available data going back to 1792. After studying the time-series properties of these variables for stationarity and cointegration, we investigate Granger causality in detail in the context of a Vector Error Correction Model. While we find causal evidence supporting Wagner’s Law, we find no evidence supporting the common assertion that a larger government sector leads to slower economic growth.
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Bibliographic InfoPaper provided by University of Nevada, Reno, Department of Economics & University of Nevada, Reno , Department of Resource Economics in its series Working Papers with number 07-002.
Length: 34 pages
Date of creation: Aug 2007
Date of revision:
long-term economic growth; federal government size; Wagner’s Law; United States; cointegration; Granger causality; vector autoregression; vector error correction model;
Find related papers by JEL classification:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
- E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
- F39 - International Economics - - International Finance - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-27 (All new papers)
- NEP-HIS-2007-08-27 (Business, Economic & Financial History)
- NEP-MAC-2007-08-27 (Macroeconomics)
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