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Federal, State, and Local Governments:Evaluating their Separate Roles in US Growth

Author

Listed:
  • Matthew J. Higgins

    (College of Management, Georgia Institute of Technology)

  • Andrew T. Young

    (Department of Economics, University of Mississippi)

  • Daniel Levy

    (Department of Economics, Bar-Ilan University, Rimini Center for Economic Analysis)

Abstract

We use US county level data (3,058 observations) from 1970 to 1998 to explore the relationship between economic growth and the extent of government employment at three levels: federal, state and local. We find that increases in federal, state and local government employments are all negatively associated with economic growth. We find no evidence that government is more efficient at more decentralized levels. While we cannot separate out the productive and redistributive services of government, we document that the county-level income distribution became slightly wider from 1970 to 1998. For those who justify government activities in terms of equity concerns – perhaps even trading off economic growth for equity – the burden falls on them to show that the income distribution would have widened more in the absence of government activities. We conclude that a release of government-employed labor inputs to the private sector would be growth-enhancing.

Suggested Citation

  • Matthew J. Higgins & Andrew T. Young & Daniel Levy, 2008. "Federal, State, and Local Governments:Evaluating their Separate Roles in US Growth," Working Papers 2008-02, Bar-Ilan University, Department of Economics.
    • Handle: RePEc:biu:wpaper:2008-02
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    Cited by:

    1. Young, Andrew T. & Higgins, Matthew J. & Levy, Daniel, 2013. "Heterogeneous Convergence," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 120(2), pages 238-241.
    2. Shanaka Herath, 2009. "The Size of the Government and Economic Growth: An Empirical Study of Sri Lanka," SRE-Disc sre-disc-2009_08, Institute for Multilevel Governance and Development, Department of Socioeconomics, Vienna University of Economics and Business.
    3. Ma, Xufei & Ding, Zhujun & Yuan, Lin, 2016. "Subnational institutions, political capital, and the internationalization of entrepreneurial firms in emerging economies," Journal of World Business, Elsevier, vol. 51(5), pages 843-854.
    4. Bologna, Jamie & Young, Andrew T. & Lacombe, Donald J., 2016. "A spatial analysis of incomes and institutional quality: evidence from US metropolitan areas," Journal of Institutional Economics, Cambridge University Press, vol. 12(1), pages 191-216, March.
    5. Snir, Avichai & Levy, Daniel, 2010. "Economic Growth in the Potterian Economy," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 211-236.
    6. Dodge Cahan & Niklas Potrafke, 2021. "The Democrat-Republican presidential growth gap and the partisan balance of the state governments," Public Choice, Springer, vol. 189(3), pages 577-601, December.
    7. Timothy Komarek & Scott Loveridge, 2015. "Firm Sizes And Economic Development: Estimating Long-Term Effects On U.S. County Growth, 1990–2000," Journal of Regional Science, Wiley Blackwell, vol. 55(2), pages 262-279, March.
    8. repec:wvu:wpaper:11-03 is not listed on IDEAS
    9. Shanaka Herath, 2012. "Size Of Government And Economic Growth: A Nonlinear Analysis," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 57(194), pages 7-30, July - Se.

    More about this item

    Keywords

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    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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