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Does Economic Performance Correlate with Big Government?

Author

Listed:
  • Peter Gordon
  • Lanlan Wang

Abstract

Development is a systematic and evolutionary process, which is not limited to the improvement of economic performance per se. Institutions that support economic freedom and governments that may or may not support development and freedom probably evolve together. A recent study by La Porta et al (1999) examines these relationships and finds, among other things, that there is a positive link between big government and economic development. We reexamine these links with international cross-sectional data for five periods and find that economic freedom and development do reinforce each other but that the size and scope of government does not play a strong role.

Suggested Citation

  • Peter Gordon & Lanlan Wang, 2004. "Does Economic Performance Correlate with Big Government?," Econ Journal Watch, Econ Journal Watch, vol. 1(2), pages 192-221, August.
  • Handle: RePEc:ejw:journl:v:1:y:2004:i:2:p:192-221
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    References listed on IDEAS

    as
    1. Dawson, John W., 2003. "Causality in the freedom-growth relationship," European Journal of Political Economy, Elsevier, vol. 19(3), pages 479-495, September.
    2. Agell, Jonas & Lindh, Thomas & Ohlsson, Henry, 1997. "Growth and the public sector: A critical review essay," European Journal of Political Economy, Elsevier, vol. 13(1), pages 33-52, February.
    3. Folster, Stefan & Henrekson, Magnus, 2001. "Growth effects of government expenditure and taxation in rich countries," European Economic Review, Elsevier, vol. 45(8), pages 1501-1520, August.
    4. Elhanan Helpman, 1999. "The Structure of Foreign Trade," Journal of Economic Perspectives, American Economic Association, pages 121-144.
    5. Zucker, Lynne G & Darby, Michael R, 1999. "Comment on "The Quality of Government": Why Do Some Governments Have Better Institutions Than Others?," Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 280-282, April.
    6. Folster, Stefan & Henrekson, Magnus, 1999. "Growth and the public sector: a critique of the critics," European Journal of Political Economy, Elsevier, pages 337-358.
    7. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
    8. Benjamin Powell, 2003. "Economic Freedom and Growth: The Case of the Celtic Tiger," Cato Journal, Cato Journal, Cato Institute, pages 431-448.
    9. Daron Acemoglu & Simon Johnson & James A. Robinson, 2002. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1231-1294.
    10. Berggren, Niclas, 2003. "The Benefits of Economic Freedom: A Survey," Ratio Working Papers 4, The Ratio Institute.
    11. W. Kenn Farr & Richard A. Lord & J. Larry Wolfenbarger, 1998. "Economic Freedom, Political Freedom, and Economic Well-Being: A Causality Analysis," Cato Journal, Cato Journal, Cato Institute, pages 247-262.
    12. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
    13. KIRMANOGLU Hasan, "undated". "Political Freedom and Economic Well-being: A Causality Analysis," EcoMod2003 330700081, EcoMod.
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    15. de Haan, Jakob & Sturm, Jan-Egbert, 2003. "Does more democracy lead to greater economic freedom? New evidence for developing countries," European Journal of Political Economy, Elsevier, vol. 19(3), pages 547-563, September.
    16. Davis, Lance & North, Douglass, 1970. "Institutional Change and American Economic Growth: A First Step Towards a Theory of Institutional Innovation," The Journal of Economic History, Cambridge University Press, vol. 30(01), pages 131-149, March.
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    18. World Bank, 2003. "World Development Indicators 2003," World Bank Publications, The World Bank, number 13920.
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    Cited by:

    1. Maren Duvendack & Richard W. Palmer-Jones & W. Robert Reed, 2015. "Replications in Economics: A Progress Report," Econ Journal Watch, Econ Journal Watch, pages 164–191-1.
    2. Andreas Bergh & Magnus Henrekson, 2011. "Government Size And Growth: A Survey And Interpretation Of The Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 25(5), pages 872-897, December.
    3. Peter H. Lindert, 2006. "The Welfare State Is the Wrong Target: A Reply to Bergh," Econ Journal Watch, Econ Journal Watch, vol. 3(2), pages 236-250, May.
    4. Andreas Bergh, 2006. "Is the Swedish Welfare State A Free Lunch?," Econ Journal Watch, Econ Journal Watch, vol. 3(2), pages 210-235, May.

    More about this item

    Keywords

    Economic development; property rights; political and institutional change;

    JEL classification:

    • P14 - Economic Systems - - Capitalist Systems - - - Property Rights
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
    • P17 - Economic Systems - - Capitalist Systems - - - Performance and Prospects

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