Economic Performance and Government Size
We construct a growth model with an explicit government role, where more government resources reduce the optimal level of private consumption and of output per worker. In the empirical analysis, for a panel of 108 countries from 1970-2008, we use different proxies for government size and institutional quality. Our results, consistent with the presented growth model, show a negative effect of the size of government on growth. Similarly, institutional quality has a positive impact on real growth, and government consumption is consistently detrimental to growth. Moreover, the negative effect of government size on growth is stronger the lower institutional quality, and the positive effect of institutional quality on growth increases with smaller governments. The negative effect on growth of the government size variables is more mitigated for Scandinavian legal origins, and stronger at lower levels of civil liberties and political rights. Finally, for the EU, better overall fiscal and expenditure rules improve growth.
|Date of creation:||Oct 2011|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL|
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- International Monetary Fund, 2010. "A Historical Public Debt Database," IMF Working Papers 10/245, International Monetary Fund.
- Afonso, António & Schuknecht, Ludger & Tanzi, Vito, 2008.
"Income distribution determinants and public spending efficiency,"
Working Paper Series
0861, European Central Bank.
- António Afonso & Ludger Schuknecht & Vito Tanzi, 2010. "Income distribution determinants and public spending efficiency," Journal of Economic Inequality, Springer, vol. 8(3), pages 367-389, September.
- António Afonso & Ludger Schknecht & Vito Tanzi, 2008. "Income Distribution Determinants and Public Spending Efficiency," Working Papers Department of Economics 2008/05, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
- Bajo-Rubio, Oscar, 2000. "A further generalization of the Solow growth model: the role of the public sector," Economics Letters, Elsevier, vol. 68(1), pages 79-84, July.
- Alberto Alesina & Eliana La Ferrara, 2000. "The Determinants of Trust," NBER Working Papers 7621, National Bureau of Economic Research, Inc.
- Agnello, Luca & Cimadomo, Jacopo, 2009.
"Discretionary Fiscal Policies over the Cycle: New Evidence based on the ESCB Disaggregated Approach,"
Working Paper Series
1118, European Central Bank.
- Luca Agnello & Jacopo Cimadomo, 2012. "Discretionary Fiscal Policies over the Cycle: New Evidence Based on the ESCB Disaggregated Approach," International Journal of Central Banking, International Journal of Central Banking, vol. 8(2), pages 43-85, June.
When requesting a correction, please mention this item's handle: RePEc:ise:isegwp:wp212011. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vitor Escaria)
If references are entirely missing, you can add them using this form.