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On the Optimal Government Size in Europe: Theory and Empirical Evidence

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  • Karras, Georgios

Abstract

This paper extimates the optimal government size for the representative European country by investigating the role of public services in the production process. The empirical results support the following conclusions: (1) government services are significantly productive; (2) there is no evidence that government services (on average) are not optimally provided; (3) the optimal government size is 16 percent (+/- 3 percent) for the average International Comparison Program European country; and (4) the marginal productivity of government services may be negatively related to government size. Copyright 1997 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Karras, Georgios, 1997. "On the Optimal Government Size in Europe: Theory and Empirical Evidence," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(3), pages 280-294, June.
  • Handle: RePEc:bla:manch2:v:65:y:1997:i:3:p:280-94
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    Cited by:

    1. Kalkuhl, Matthias & Fernandez Milan, Blanca & Schwerhoff, Gregor & Jakob, Michael & Hahnen, Maren & Creutzig, Felix, 2017. "Fiscal Instruments for Sustainable Development: The Case of Land Taxes," MPRA Paper 78652, University Library of Munich, Germany.
    2. Asimakopoulos, Stylianos & Karavias, Yiannis, 2016. "The impact of government size on economic growth: A threshold analysis," Economics Letters, Elsevier, vol. 139(C), pages 65-68.
    3. Marta Simões & João Sousa Andrade & Adelaide Duarte, 2012. "Convergence and Growth: Portugal in the EU 1986-2010," GEMF Working Papers 2012-13, GEMF, Faculty of Economics, University of Coimbra.
    4. Alleyne, K.A. & Lewis-Bynoe, D. & Moore, W., 2004. "An Assessment of the Growth-Enhancing Size of Government in the Caribbean," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 4(3).
    5. João Sousa Andrade & Adelaide Duarte & Marta Simões, 2014. "A Quantile Regression Analysis of Growth and Convergence in the EU: Potential Implications for Portugal," Notas Económicas, Faculty of Economics, University of Coimbra, issue 39, pages 48-72, June.
    6. Hassan Aly & Mark Strazicich, 2000. "Is Government Size Optimal in the Gulf Countries of the Middle East? An empirical investigation," International Review of Applied Economics, Taylor & Francis Journals, vol. 14(4), pages 475-483.
    7. Joao Sousa Andrade & Marta Simões & Adelaide Duarte, 2016. "A thresholds analysis of growth, convergence and structural change in the EU: insights for Portugal," EcoMod2016 9690, EcoMod.
    8. Shagas, Natalia & Bojechkova, A.V. & Pervishin, Y.N. & Perevyshina, E.A., 2016. "Modeling of State Influence on the Processes of Economic Growth," Working Papers 2132, Russian Presidential Academy of National Economy and Public Administration.
    9. Pelin Varol Iyidogan & Taner Turan, 2017. "Government Size and Economic Growth in Turkey: A Threshold Regression Analysis," Prague Economic Papers, University of Economics, Prague, vol. 2017(2), pages 142-154.
    10. Stefan Kühn & Joan Muysken & Tom van Veen, 2010. "The Adverse Effect Of Government Spending On Private Consumption In New Keynesian Models," Metroeconomica, Wiley Blackwell, vol. 61(4), pages 621-639, November.
    11. J. Stephen Ferris, 2010. "Fiscal Policy from a Public Choice Perspective," Carleton Economic Papers 10-10, Carleton University, Department of Economics.

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