Expenditure Efficiency and the Optimal Size of Government in Developing Countries
Government efficiency plays a significant role in the relationship between government expenditure and economic growth. Based on panel data from 63 developing countries 1990 to 2003, we calculate efficiency scores using Data Envelopment Analysis, incorporate them into a simple model of growth with government expenditure. We find that there is a critical level of efficiency required for government expenditure to have positive effect on growth. Further, above a critical level of efficiency, greater efficiency lowers the optimal size of government expenditure required to maximize growth.
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- 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.
- Folster, Stefan & Henrekson, Magnus, 2001. "Growth effects of government expenditure and taxation in rich countries," European Economic Review, Elsevier, vol. 45(8), pages 1501-1520, August.
- Fölster, Stefan & Henrekson, Magnus, 2000. "Growth Effects of Government Expenditure and Taxation in Rich Countries," SSE/EFI Working Paper Series in Economics and Finance 391, Stockholm School of Economics.
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