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The causes of government and the consequences for growth and well-being

Author

Listed:
  • Commander, Simon
  • Davoodi, Hamid R.
  • Lee, Une J.

Abstract

Using a large cross-country data set, the authors examine the factors that cause governments to grow, and analyze how the size of government affects growth, whether measured as income growth or other measures of well-being, such as infant mortality and life expectancy. They find no robust link between government size and per capita income. The factors they find to be important in explaining government size are relative prices, the age-dependency ratio, how long a country has been independent, relative political freedom, and openness in trade. Their results also partially support the view that governments use consumption to buffer external risk, especially in low-income countries. As for how government size affects growth, they find a robust and significant negative relationship between growth and government size, as measured by consumption. Policy distortions, predictably, also have a negative effect on growth. But the positive effects of well-functioning institutions and high quality in government bureaucracies can offset the negative influence of large government size alone. Finally, they find that social-sector spending can exert a positive influence by reducing infant mortality and raising life expectancy. Better income distribution, higher per capita income, higher per capita income growth, and more political freedom have the same positive effect on those two measures of well-being.

Suggested Citation

  • Commander, Simon & Davoodi, Hamid R. & Lee, Une J., 1997. "The causes of government and the consequences for growth and well-being," Policy Research Working Paper Series 1785, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1785
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    References listed on IDEAS

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    Cited by:

    1. Rama,Martin G., 1997. "Efficient public sector downsizing," Policy Research Working Paper Series 1840, The World Bank.
    2. -, 1998. "Taller sobre Evaluación de la Gestión del Gasto Público; compendio de documentos," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34391, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    3. Peter Lindert, 2003. "Why The Welfare State Looks Like a Free Lunch," Working Papers 27, University of California, Davis, Department of Economics.
    4. Estela Sáenz Rodríguez & Marcela Sabaté Sort & Mª. Dolores Gadea Rivas, 2011. "¿Condiciona la apertura exterior el tamaño del sector público? Un panorama," Hacienda Pública Española, IEF, vol. 198(3), pages 131-149, September.

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