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The Size and Composition of Government Spending in Europe and Its Impact on Well-Being

  • Hessami, Zohal

This paper analyses whether large governments in Europe reflect efficient responses to a changing social and economic environment (‘welfare economic view’) as opposed to wasteful spending (‘public choice view’). To this end, the effect of government size on subjective well-being is estimated in a micro dataset covering twelve EU countries from 1990 to 2000. The estimations provide evidence for (i) an inversely U-shaped relationship between public sector size and well-being. (ii) The effect of government size on well-being depends on levels of corruption and decentralization as well as people’s ideological preferences and their position in the income distribution. Finally, (iii) higher levels of well-being could have been achieved by spending more on education and less on social protection.

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File URL: http://mpra.ub.uni-muenchen.de/21195/1/MPRA_paper_21195.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 21195.

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Date of creation: 07 Mar 2010
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Handle: RePEc:pra:mprapa:21195
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