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The Shifting Scully Curve: International Evidence from 1870 to 2013

Author

Listed:
  • Livio Di Matteo

    (Department of Economics, Lakehead University, Canada)

  • Fraser Summerfield

    (Rimini Centre for Economic Analysis; Department of Economics, St Francis Xavier University, Canada)

Abstract

Scully curve predictions for growth-maximizing public sector size are estimated using panel data covering 17 industrialized nations from 1870-2013. Fixed-effects regression models find that government expenditure to GDP ratios between 27-32% are growth maximizing. The economic growth maximizing size shifted over time ranging from 9% pre-WWI to 25% Post WWII with less precise estimates suggesting 30% during inter-war years. A flattening out of the Scully curve occurs after the mid 1970s with the exception of the Nordic countries, which drive up government size considerably. As well, IV estimates of the Scully relationship suggest that the Scully curve may be subject to some reverse causality.

Suggested Citation

  • Livio Di Matteo & Fraser Summerfield, 2018. "The Shifting Scully Curve: International Evidence from 1870 to 2013," Working Paper series 18-01, Rimini Centre for Economic Analysis.
    • Handle: RePEc:rim:rimwps:18-01
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    More about this item

    Keywords

    Scully Curve; Public Sector Size; Economic Growth;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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