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Do Smaller Governments Raise the Level or Growth of Output? A Review of Recent Evidence

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  • Gemmell Norman

    () (Victoria Business School, Victoria University of Wellington, New Zealand)

  • Au Joey

    (Chief Economist’s Unit, The Treasury, New Zealand)

Abstract

Theoretical developments, improved methodologies and more extensive data have helped generate a dramatic increase in the literature testing for the impact of government size and fiscal policy on economic growth in recent years. We review a range of the more recent evidence and examine (1) the consistency or robustness of the results; (2) how these results differ from the earlier literature and (3) their usefulness as a guide to policy reform in practice. We find that the last decade has produced more robust evidence and more plausible orders of magnitude on the impact of fiscal policy on growth. However, the value of this evidence remains limited as a basis for quantifying macro-economic responses to fiscal policy reform in practice.

Suggested Citation

  • Gemmell Norman & Au Joey, 2013. "Do Smaller Governments Raise the Level or Growth of Output? A Review of Recent Evidence," Review of Economics, De Gruyter, vol. 64(2), pages 85-116, August.
  • Handle: RePEc:lus:reveco:v:64:y:2013:i:2:p:85-116
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    References listed on IDEAS

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    Cited by:

    1. Bodo Knoll & Hans Pitlik, 2016. "Who benefits from big government? A life satisfaction approach," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 43(3), pages 533-557, August.

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