The causes of government and the consequences for growth and well-being
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.
|Date of creation:||30 Jun 1997|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
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.:
- Barro, R.J., 1989.
"Economic Growth In A Cross Section Of Countries,"
RCER Working Papers
201, University of Rochester - Center for Economic Research (RCER).
- 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.
- Ludger Schuknecht & Vito Tanzi, 1995. "The Growth of Government and the Reform of the State in Industrial Countries," IMF Working Papers 95/130, International Monetary Fund.
- Rodrik, Dani & Alesina, Alberto, 1994.
"Distributive Politics and Economic Growth,"
4551798, Harvard University Department of Economics.
- Ramey, Garey & Ramey, Valerie A, 1995.
"Cross-Country Evidence on the Link between Volatility and Growth,"
American Economic Review,
American Economic Association, vol. 85(5), pages 1138-51, December.
- Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
- Rodrik, Dani, 1996.
"Why do More Open Economies Have Bigger Governments?,"
CEPR Discussion Papers
1388, C.E.P.R. Discussion Papers.
- Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
- Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc.
- David Dollar & Craig Burnside, 2000.
"Aid, Policies, and Growth,"
American Economic Review,
American Economic Association, vol. 90(4), pages 847-868, September.
- Joel Slemrod, 1995. "Involvement, Prosperity, and Economic Growth?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 373-431.
- B. Bosworth & S. M. Collins & Y. Chen, .
"Accounting for Difference in Economic Growth,"
115, Brookings Institution International Economics.
- 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.
- Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
- Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999.
"A Data Set on Income Distribution,"
CEMA Working Papers
575, China Economics and Management Academy, Central University of Finance and Economics.
- Robert J. Barro, 1998.
"Determinants of Economic Growth: A Cross-Country Empirical Study,"
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262522543, June.
- Robert J. Barro, 1996. "Determinants of Economic Growth: A Cross-Country Empirical Study," NBER Working Papers 5698, National Bureau of Economic Research, Inc.
- Sudhir Anand & Martin Ravallion, 1993. "Human Development in Poor Countries: On the Role of Private Incomes and Public Services," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 133-150, Winter.
- Pritchett, Lant, 1996. "Mind your P's and Q's : the cost of public investment is not the value of public capital," Policy Research Working Paper Series 1660, The World Bank.
- Devarajan, Shantayanan & Swaroop, Vinaya & Heng-fu, Zou, 1996.
"The composition of public expenditure and economic growth,"
Journal of Monetary Economics,
Elsevier, vol. 37(2-3), pages 313-344, April.
- 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.
- Klaus Deininger & Lyn Squire, 1996.
"A New Data Set Measuring Income Inequality,"
CEMA Working Papers
512, China Economics and Management Academy, Central University of Finance and Economics.
- Alan T. Peacock & Jack Wiseman, 1961. "The Growth of Public Expenditure in the United Kingdom," NBER Books, National Bureau of Economic Research, Inc, number peac61-1.
- Lant Pritchett & Lawrence H. Summers, 1996.
"Wealthier is Healthier,"
Journal of Human Resources,
University of Wisconsin Press, vol. 31(4), pages 841-868.
- Lindauer, David L., 1988. "The size and growth of government spending," Policy Research Working Paper Series 44, The World Bank.
- Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
- William Easterly & Michael Kremer & Lant Pritchett & Lawrence H. Summers, 1993.
"Good Policy or Good Luck? Country Growth Performance and Temporary Shocks,"
NBER Working Papers
4474, National Bureau of Economic Research, Inc.
- Easterly, William & Kremer, Michael & Pritchett, Lant & Summers, Lawrence H., 1993. "Good policy or good luck?: Country growth performance and temporary shocks," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 459-483, December.
- Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, number 9780198287766.
- Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
- Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1785. 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: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.