IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Optimal Government Size and Economic Growth in France (1871-2008): An explanation by the State and Market Failures

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

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: ftp://mse.univ-paris1.fr/pub/mse/CES2011/11077.pdf
Download Restriction: no

Paper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 11077.

as
in new window

Length: 38 pages
Date of creation: Dec 2011
Date of revision:
Handle: RePEc:mse:cesdoc:11077
Contact details of provider: Postal:
106-112 boulevard de l'Hôpital 75 647 PARIS CEDEX 13

Phone: + 33 44 07 81 00
Fax: + 33 1 44 07 83 01
Web page: http://centredeconomiesorbonne.univ-paris1.fr/

More information through EDIRC

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.:

as in new window
  1. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
  2. Renaud Bourlès & Gilbert Cette & Jimmy Lopez & Jacques Mairesse & Giuseppe Nicoletti, 2013. "Do Product Market Regulations In Upstream Sectors Curb Productivity Growth? Panel Data Evidence For Oecd Countries," Post-Print hal-01247372, HAL.
  3. Alptekin, Aynur & Levine, Paul, 2010. "Military Expenditure and Economic Growth: A Meta-Analysis," MPRA Paper 28853, University Library of Munich, Germany.
  4. Peden, Edgar A, 1991. "Productivity in the United States and Its Relationship to Government Activity: An Analysis of 57 Years, 1929-1986," Public Choice, Springer, vol. 69(2), pages 153-73, February.
  5. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  6. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
  7. Ciccone, Antonio & Jarociński, Marek, 2008. "Determinants of economic growth: will data tell?," Working Paper Series 0852, European Central Bank.
  8. Michael Munger, 2008. "Economic choice, political decision, and the problem of limits," Public Choice, Springer, vol. 137(3), pages 507-522, December.
  9. Hans Pitlik & Margit Schratzenstaller, 2011. "Growth Implications of Structure and Size of Public Sectors," WIFO Working Papers 404, WIFO.
  10. Alberto Alesina & Silvia Ardagna & Roberto Perotti & Fabio Schiantarelli, 2002. "Fiscal Policy, Profits, and Investment," American Economic Review, American Economic Association, vol. 92(3), pages 571-589, June.
  11. Charles T. Carlstrom & Jagadeesh Gokhale, 1991. "Government consumption, taxation, and economic activity," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 18-29.
  12. Baldacci, Emanuele & Hillman, Arye L. & Kojo, Naoko C., 2004. "Growth, governance, and fiscal policy transmission channels in low-income countries," European Journal of Political Economy, Elsevier, vol. 20(3), pages 517-549, September.
  13. Eric Zivot & Donald W.K. Andrews, 1990. "Further Evidence on the Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Cowles Foundation Discussion Papers 944, Cowles Foundation for Research in Economics, Yale University.
  14. Andrea Bassanini & Stefano Scarpetta, 2003. "The Driving Forces of Economic Growth: Panel Data Evidence for the OECD Countries," OECD Economic Studies, OECD Publishing, vol. 2001(2), pages 9-56.
  15. Sobel, Russell S & Garrett, Thomas A, 2002. "On the Measurement of Rent Seeking and Its Social Opportunity Cost," Public Choice, Springer, vol. 112(1-2), pages 115-36, July.
  16. Cronovich, Ron, 1998. "Measuring the Human Capital Intensity of Government Spending and Its Impact on Economic Growth in a Cross Section of Countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 45(1), pages 48-77, February.
  17. Peter Boettke & Christopher Coyne & Peter Leeson, 2007. "Saving government failure theory from itself: recasting political economy from an Austrian perspective," Constitutional Political Economy, Springer, vol. 18(2), pages 127-143, June.
  18. Philip Grossman, 1988. "Government and economic growth: A non-linear relationship," Public Choice, Springer, vol. 56(2), pages 193-200, February.
  19. Angelopoulos, Konstantinos & Economides, George & Kammas, Pantelis, 2012. "Does cabinet ideology matter for the structure of tax policies?," European Journal of Political Economy, Elsevier, vol. 28(4), pages 620-635.
  20. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  21. Bauernschuster, Stefan & Falck, Oliver & Gold, Robert & Heblich, Stephan, 2012. "The shadows of the socialist past: Lack of self-reliance hinders entrepreneurship," Munich Reprints in Economics 20118, University of Munich, Department of Economics.
  22. Henrekson, Magnus, 1993. "Wagner's Law--A Spurious Relationship?," Public Finance = Finances publiques, , vol. 48(3), pages 406-15.
  23. Afonso, António & Schuknecht, Ludger & Tanzi, Vito, 2003. "Public sector efficiency: an international comparison," Working Paper Series 0242, European Central Bank.
  24. Caplan, Bryan & Stringham, Edward, 2005. "Mises, Bastiat, public opinion, and public choice," MPRA Paper 26084, University Library of Munich, Germany.
  25. Afonso, António & Furceri, Davide, 2008. "Government size, composition, volatility and economic growth," Working Paper Series 0849, European Central Bank.
  26. Ahmed, Shaghil, 1986. "Temporary and permanent government spending in an open economy: Some evidence for the United Kingdom," Journal of Monetary Economics, Elsevier, vol. 17(2), pages 197-224, March.
  27. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October.
  28. Panagiotis Evangelopoulos, 2007. "Towards a synthesis of theories of State failure," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 54(1), pages 13-34, March.
  29. Zhang, Tao & Zou, Heng-fu, 1998. "Fiscal decentralization, public spending, and economic growth in China," Journal of Public Economics, Elsevier, vol. 67(2), pages 221-240, February.
  30. Eric M. Engen & Jonathan Skinner, 1992. "Fiscal Policy and Economic Growth," NBER Working Papers 4223, National Bureau of Economic Research, Inc.
  31. James Gwartney & Randal Holcombe & Robert Lawson, 1998. "The Scope of Government and the Wealth of Nations," Cato Journal, Cato Journal, Cato Institute, vol. 18(2), pages 163-190, Fall.
  32. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
  33. Karras, Georgios, 1993. "Employment and Output Effects of Government Spending: Is Government Size Important?," Economic Inquiry, Western Economic Association International, vol. 31(3), pages 354-69, July.
  34. Shantayanan Devarajan & Vinaya Swaroop & Heng-fu Zou, 1996. "The composition of public expenditure and economic growth," CEMA Working Papers 77, China Economics and Management Academy, Central University of Finance and Economics.
  35. Hillman,Arye L., 2009. "Public Finance and Public Policy," Cambridge Books, Cambridge University Press, number 9780521738057, December.
  36. Masami Imai, 2009. "Ideologies, vested interest groups, and postal saving privatization in Japan," Public Choice, Springer, vol. 138(1), pages 137-160, January.
  37. Potrafke, Niklas & Ursprung, Heinrich W., 2012. "Globalization and gender equality in the course of development," Munich Reprints in Economics 19305, University of Munich, Department of Economics.
  38. Philip Grossman, 1987. "The optimal size of government," Public Choice, Springer, vol. 53(2), pages 131-147, January.
  39. Guseh, James S., 1997. "Government Size and Economic Growth in Developing Countries: A Political-Economy Framework," Journal of Macroeconomics, Elsevier, vol. 19(1), pages 175-192, January.
  40. Tanzi,Vito & Schuknecht,Ludger, 2000. "Public Spending in the 20th Century," Cambridge Books, Cambridge University Press, number 9780521662918, December.
  41. Fölster, Stefan & Henrekson, Magnus, 1998. "Growth Effects of Government Expenditure and Taxation in Rich Countries," Working Paper Series 503, Research Institute of Industrial Economics, revised 20 Jun 2000.
  42. Yesim Kustepeli, 2005. "The Relationship Between Government Size and Economic Growth: Evidence From a Panel Data Analysis," Discussion Paper Series 05/06, Dokuz Eylül University, Faculty of Business, Department of Economics, revised 06 Dec 2005.
  43. Nijkamp, Peter & Poot, Jacques, 2004. "Meta-analysis of the effect of fiscal policies on long-run growth," European Journal of Political Economy, Elsevier, vol. 20(1), pages 91-124, March.
  44. Karras, Georgios, 1996. "The Optimal Government Size: Further International Evidence on the Productivity of Government Services," Economic Inquiry, Western Economic Association International, vol. 34(2), pages 193-203, April.
  45. Guido Tabellini, 2004. "The Role of the State in Economic Development," Levine's Bibliography 122247000000000720, UCLA Department of Economics.
  46. repec:hrv:faseco:3353756 is not listed on IDEAS
  47. Le Grand, Julian, 1991. "The Theory of Government Failure," British Journal of Political Science, Cambridge University Press, vol. 21(04), pages 423-442, October.
  48. 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.
  49. Forte Francesco & Magazzino Cosimo, 2011. "Optimal Size Government and Economic Growth in EU Countries," Economia politica, Società editrice il Mulino, issue 3, pages 295-322.
  50. Peter Bernholz, 2000. "Democracy and capitalism: Are they compatible in the long-run?," Journal of Evolutionary Economics, Springer, vol. 10(1), pages 3-16.
  51. Mixon, Franklin G, Jr & Laband, David N & Ekelund, Robert B, Jr, 1994. "Rent Seeking and Hidden In-Kind Resource Distortion: Some Empirical Evidence," Public Choice, Springer, vol. 78(2), pages 1717-85, February.
  52. Agell, Jonas & Lindh, Thomas & Ohlsson, Henry, 1997. "Growth and the public sector: A critical review essay," European Journal of Political Economy, Elsevier, vol. 13(1), pages 33-52, February.
  53. Andres, Javier & Domenech, Rafael & Molinas, Cesar, 1996. "Macroeconomic performance and convergence in OECD countries," European Economic Review, Elsevier, vol. 40(9), pages 1683-1704, December.
  54. Christoph Schaltegger & Benno Torgler, 2006. "Growth effects of public expenditure on the state and local level: evidence from a sample of rich governments," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1181-1192.
  55. Cowen, Tyler, 1992. "Law as a Public Good: The Economics of Anarchy," Economics and Philosophy, Cambridge University Press, vol. 8(02), pages 249-267, October.
  56. Davies, Antony, 2009. "Human development and the optimal size of government," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(2), pages 326-330, March.
  57. Abdullah Yavas, 1998. "Does too much government investment retard economic development of a country?," Journal of Economic Studies, Emerald Group Publishing, vol. 25(4), pages 296-308, September.
  58. de la Fuente, A., 1997. "Fiscal policy and Growth in The OECD. Volume II: Appendix," UFAE and IAE Working Papers 401.97, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  59. Jan Fidrmuc, 2001. "Economic Reform, Democracy and Growth During Post-Communist Transition," William Davidson Institute Working Papers Series 372, William Davidson Institute at the University of Michigan.
  60. Hansson, Par & Henrekson, Magnus, 1994. "A New Framework for Testing the Effect of Government Spending on Growth and Productivity," Public Choice, Springer, vol. 81(3-4), pages 381-401, December.
  61. Michael Marlow, 1986. "Private sector shrinkage and the growth of industrialized economies," Public Choice, Springer, vol. 49(2), pages 143-154, January.
  62. Folster, Stefan & Henrekson, Magnus, 1999. "Growth and the public sector: a critique of the critics," European Journal of Political Economy, Elsevier, vol. 15(2), pages 337-358, June.
  63. Abrams, Burton A, 1999. "The Effect of Government Size on the Unemployment Rate," Public Choice, Springer, vol. 99(3-4), pages 395-401, June.
  64. Romero-Ávila, Diego & Strauch, Rolf, 2008. "Public finances and long-term growth in Europe: Evidence from a panel data analysis," European Journal of Political Economy, Elsevier, vol. 24(1), pages 172-191, March.
  65. de la Fuente, Angel, 1997. "Fiscal Policy and Growth in the OECD," CEPR Discussion Papers 1755, C.E.P.R. Discussion Papers.
  66. Jean-Charles Asselain & Bertrand Blancheton, 2005. "Dynamique de l'ouverture internationale. Paradoxe, enjeux éléments d'interprétation à partir du cas de la France," Post-Print hal-00157046, HAL.
  67. Chen, Sheng-Tung & Lee, Chien-Chiang, 2005. "Government size and economic growth in Taiwan: A threshold regression approach," Journal of Policy Modeling, Elsevier, vol. 27(9), pages 1051-1066, December.
  68. Evans, Paul & Karras, Georgios, 1994. "Are Government Activities Productive? Evidence from a Panel of U.S. States," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 1-11, February.
  69. Basil Dalamagas, 2000. "Public sector and economic growth: the Greek experience," Applied Economics, Taylor & Francis Journals, vol. 32(3), pages 277-288.
  70. Grossman, Philip J, 1988. "Growth in Government and Economic Growth: The Australian Experience," Australian Economic Papers, Wiley Blackwell, vol. 27(50), pages 33-43, June.
  71. Anaman, Kwabena A., 2004. "Determinants of economic growth in Brunei Darussalam," Journal of Asian Economics, Elsevier, vol. 15(4), pages 777-796, August.
  72. Edgar Peden & Michael Bradley, 1989. "Government size, productivity, and economic growth: The post-war experience," Public Choice, Springer, vol. 61(3), pages 229-245, June.
  73. A. Illarionov & N. Pivovarova., 2002. "The Size of Government and Economic Growth," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 9.
  74. Zaidi Sattar, 1993. "Public expenditure and economic performance: A comparison of developed and low‐income developing economies," Journal of International Development, John Wiley & Sons, Ltd., vol. 5(1), pages 27-49, 01.
  75. Atrayee Ghosh Roy, 2009. "Evidence on economic growth and government size," Applied Economics, Taylor & Francis Journals, vol. 41(5), pages 607-614.
  76. Tridimas, George & Winer, Stanley L., 2005. "The political economy of government size," European Journal of Political Economy, Elsevier, vol. 21(3), pages 643-666, September.
  77. Stefan Mittnik & Thorsten Neumann, 2003. "Time-Series Evidence on the Nonlinearity Hypothesis for Public Spending," Economic Inquiry, Western Economic Association International, vol. 41(4), pages 565-573, October.
  78. Massimo Florio & Sara Colautti, 2005. "A logistic growth theory of public expenditures: A study of five countries over 100 years," Public Choice, Springer, vol. 122(3), pages 355-393, March.
  79. Vito Tanzi & Howell H Zee, 1996. "Fiscal Policy and Long-Run Growth," IMF Working Papers 96/119, International Monetary Fund.
  80. Khalifa Ghali, 1999. "Government size and economic growth: evidence from a multivariate cointegration analysis," Applied Economics, Taylor & Francis Journals, vol. 31(8), pages 975-987.
  81. Andreas Bergh & Magnus Henrekson, 2011. "Government Size And Growth: A Survey And Interpretation Of The Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 25(5), pages 872-897, December.
  82. Kristof Witte & Wim Moesen, 2010. "Sizing the government," Public Choice, Springer, vol. 145(1), pages 39-55, October.
  83. Robert J. Barro, 1991. "A Cross-Country Study of Growth, Saving, and Government," NBER Chapters, in: National Saving and Economic Performance, pages 271-304 National Bureau of Economic Research, Inc.
  84. Borooah, Vani K. & Paldam, Martin, 2007. "Why is the world short of democracy?: A cross-country analysis of barriers to representative government," European Journal of Political Economy, Elsevier, vol. 23(3), pages 582-604, September.
  85. Bohl, Martin T, 1996. "Some International Evidence on Wagner's Law," Public Finance = Finances publiques, , vol. 51(2), pages 185-200.
  86. Grier, Kevin B. & Tullock, Gordon, 1989. "An empirical analysis of cross-national economic growth, 1951-1980," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 259-276, September.
  87. Mueller,Dennis C., 2003. "Public Choice III," Cambridge Books, Cambridge University Press, number 9780521894753, December.
  88. Payne, James E & Ewing, Bradley T, 1996. "International Evidence on Wagner's Hypothesis: A Cointegration Analysis," Public Finance = Finances publiques, , vol. 51(2), pages 258-74.
  89. Ram, Rati, 1986. "Government Size and Economic Growth: A New Framework and Some Evidencefrom Cross-Section and Time-Series Data," American Economic Review, American Economic Association, vol. 76(1), pages 191-203, March.
  90. Park, Hyun & Philippopoulos, Apostolis & Vassilatos, Vanghelis, 2005. "Choosing the size of the public sector under rent seeking from state coffers," European Journal of Political Economy, Elsevier, vol. 21(4), pages 830-850, December.
  91. Jérôme Creel & Bruno Ducoudré & Catherine Mathieu & Henri Sterdyniak, 2005. "Doit-on oublier la politique budgétaire ?. Une analyse critique de la nouvelle théorie anti-keynésienne des finances publiques," Revue de l'OFCE, Presses de Sciences-Po, vol. 92(1), pages 43-97.
  92. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  93. Dar, Atul A. & AmirKhalkhali, Sal, 2002. "Government size, factor accumulation, and economic growth: evidence from OECD countries," Journal of Policy Modeling, Elsevier, vol. 24(7-8), pages 679-692, November.
  94. Gerald Scully, 1989. "The size of the state, economic growth and the efficient utilization of national resources," Public Choice, Springer, vol. 63(2), pages 149-164, November.
  95. Brady, Gordon L & Clark, J R & Davis, William L, 1995. "The Political Economy of Dissonance," Public Choice, Springer, vol. 82(1-2), pages 37-51, January.
  96. Bergh, Andreas & Karlsson, Martin, 2009. "Government Size and Growth: Accounting for Economic Freedom and Globalization," Ratio Working Papers 130, The Ratio Institute.
  97. 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.
  98. Nannestad, Peter, 2007. "Immigration and welfare states: A survey of 15 years of research," European Journal of Political Economy, Elsevier, vol. 23(2), pages 512-532, June.
  99. Lee, Jong-Wha, 1995. "Capital goods imports and long-run growth," Journal of Development Economics, Elsevier, vol. 48(1), pages 91-110, October.
  100. Angelopoulos, Konstantinos & Economides, George & Kammas, Pantelis, 2007. "Tax-spending policies and economic growth: Theoretical predictions and evidence from the OECD," European Journal of Political Economy, Elsevier, vol. 23(4), pages 885-902, December.
  101. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
  102. Jean-Pascal Guironnet & Nicolas Peypoch, 2005. "Human Capital Allocation and Overeducation: A Measure of French Productivity," Working Papers 05-10, LAMETA, Universtiy of Montpellier, revised Oct 2005.
  103. repec:cto:journl:v:18:y:1998:i:2:p: is not listed on IDEAS
  104. Edmund J. Sheehey, 1993. "The Effect of Government Size on Economic Growth," Eastern Economic Journal, Eastern Economic Association, vol. 19(3), pages 321-328, Summer.
  105. Saten Kumar & Don J. Webber & Scott Fargher, 2012. "Wagner's Law revisited: cointegration and causality tests for New Zealand," Applied Economics, Taylor & Francis Journals, vol. 44(5), pages 607-616, February.
  106. Wing Yuk, 2005. "Government Size and Economic Growth: Time-Series Evidence for the United Kingdom, 1830-1993," Econometrics Working Papers 0501, Department of Economics, University of Victoria.
  107. Peter T. Leeson, 2007. "An-arrgh-chy: The Law and Economics of Pirate Organization," Journal of Political Economy, University of Chicago Press, vol. 115(6), pages 1049-1094, December.
  108. Been-Lon Chen, 2006. "Economic growth with an optimal public spending composition," Oxford Economic Papers, Oxford University Press, vol. 58(1), pages 123-136, January.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mse:cesdoc:11077. 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: (Lucie Label)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.