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Optimal government size and economic growth in France (1871-2008) : An explanation by the State and market failures

  • François Facchini

    ()

    (Axe Institutions - CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS)

  • Mickaël Melki

    ()

    (Axe Institutions - CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS)

This paper analyses the effect of public expenditure on economic growth from both a theoretical and an empirical point of view. Given that the economic literature supplies numerous and conflicting views on the topic, the article offers a framework combining both theories of market failures and State failures to account for an inverted U-shapped relation between government size and GDP growth. The empirical contribution is to provide evidence through a long time-series analysis of the existence of such a relation on the period 1871-2008 for France, which offers one of the longest stable democratic periods to analyse.

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