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Exploring Cross-Country Variation In Government Shares: What Can We Learn From Relative Productivities?

Author

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  • Obrizan, Maksym

Abstract

Government shares in total output are characterized by significant variation across countries. I noticed a strong negative correlation between government consumption shares and the price of government services in terms of private consumption. Motivated by this empirical observation, I developed a neoclassical growth model with added government that is capable of matching the variation in government shares very closely using only relative prices. In addition, I provide empirical evidence showing that the relative price of government consumption increases with income, which is consistent with distortions prevailing in poor countries. These two observations combined imply that government shares tend to be higher in poorer countries.

Suggested Citation

  • Obrizan, Maksym, 2013. "Exploring Cross-Country Variation In Government Shares: What Can We Learn From Relative Productivities?," Macroeconomic Dynamics, Cambridge University Press, vol. 17(2), pages 356-372, March.
    • Handle: RePEc:cup:macdyn:v:17:y:2013:i:02:p:356-372_00
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    Cited by:

    1. Wei-Bin Zhang, 2014. "National and International Inequalities in Income and Wealth in a Global Growth with Free Trade and National Inflation Policies," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences;Institute for World Economy of the Romanian Academy, vol. 2(1), pages 22-40, May.

    More about this item

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical

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