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An Investigation on the Relationship between Government Size and Unemployment Rate: Evidence from OECD Countries

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  • Ahmet AYSU
  • Gökhan DÖKMEN

Abstract

It is widely accepted that size of government is an important determinant of labor market performance. Therefore, understanding the effects of government size on employment is both empirically and theoretically critical. Recent empirical studies indicate that the size of government is inversely related to labor market performance. This study examines the relationship between government size and unemployment rate for 17 OECD countries over the period of 1990-2007 using panel cointegration analysis. The empirical findings indicate a statistically significant relationship between size of government and unemployment rates.

Suggested Citation

  • Ahmet AYSU & Gökhan DÖKMEN, 2011. "An Investigation on the Relationship between Government Size and Unemployment Rate: Evidence from OECD Countries," Sosyoekonomi Journal, Sosyoekonomi Society, issue 16(16).
    • Handle: RePEc:sos:sosjrn:110209
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    References listed on IDEAS

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    More about this item

    Keywords

    Government Size; Unemployment Rate; Panel Cointegration.;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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