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The Scope of Government and its Impact on Economic Growth in OECD Countries




This paper investigates the relationship between the size of government and economic growth in OECD countries in 1960–2000. The underlying idea is that government expenditures on public goods basically have a positive effect on growth, but this growth effect tends to decline or even reverse when government is overdoing, e.g. by increasing expenditures in such a way that it ultimately also provides private goods. Empirical analyses based on panel estimates for 21 OECD countries support this hypothesis: Total government expenditures as well as expenditures by type indicate a significant negative impact on economic growth (excepting public investments) in these countries.

Suggested Citation

  • Heitger, Bernhard, 2002. "The Scope of Government and its Impact on Economic Growth in OECD Countries," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 55(3), pages 323-350.
  • Handle: RePEc:ris:ecoint:0181

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    References listed on IDEAS

    1. Eichengreen, Barry & Rose, Andrew K & Wyplosz, Charles, 1996. "Contagious Currency Crises," CEPR Discussion Papers 1453, C.E.P.R. Discussion Papers.
    2. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
    3. Obstfeld, Maurice, 1986. "Rational and Self-fulfilling Balance-of-Payments Crises," American Economic Review, American Economic Association, vol. 76(1), pages 72-81, March.
    4. Paul R Masson, 1998. "Contagion; Monsoonal Effects, Spillovers, and Jumps Between Multiple Equilibria," IMF Working Papers 98/142, International Monetary Fund.
    5. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-325, August.
    6. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency crashes in emerging markets: An empirical treatment," Journal of International Economics, Elsevier, vol. 41(3-4), pages 351-366, November.
    7. van der Ploeg, Frederick, 1989. "The Political Economy of Overvaluation," Economic Journal, Royal Economic Society, vol. 99(397), pages 850-855, September.
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    More about this item

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General


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