The Labor Share and the Size of Government
The size of government depends positively on the labor share given price-inelastic demand for public services. OECD data support this hypothesis and also show a stronger dependence under left-wing ideology because larger government employs a larger workforce. A permanent one standard deviation increase in the labor share is found on average to increase government size by about 9% of GDP, with increases of 6% in right-wing countries and 12% in left-wing countries. Contrary to Baumol's cost-disease the relationship is estimated to be independent of income. Recent reductions in the labor-share have substantially slowed the growth of government in many countries.
|Date of creation:||Jan 2013|
|Contact details of provider:|| Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom|
Phone: (0)1904 323776
Web page: https://www.york.ac.uk/economics/
More information through EDIRC
References listed on IDEAS
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.:
- Bruno, Giovanni S.F., 2005.
"Approximating the bias of the LSDV estimator for dynamic unbalanced panel data models,"
Elsevier, vol. 87(3), pages 361-366, June.
- Giovanni S.F. Bruno, 2004. "Approximating the Bias of the LSDV Estimator for Dynamic Unbalanced Panel Data Models," KITeS Working Papers 159, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2004.
- Shelton, Cameron A., 2007. "The size and composition of government expenditure," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2230-2260, December.
- Ferris, J Stephen & West, Edwin G, 1999. "Cost Disease versus Leviathan Explanations of Rising Government Cost: An Empirical Investigation," Public Choice, Springer, vol. 98(3-4), pages 307-316, March.
- Magnus Henrekson & Johan Lybeck, 1988. "Explaining the growth of government in Sweden: A disequilibrium approach," Public Choice, Springer, vol. 57(3), pages 213-232, June.
- Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
- Tom Doan, "undated". "LSDVC: RATS procedure to estimate a dynamic FE model with correction for bias," Statistical Software Components RTS00111, Boston College Department of Economics.
- Thomas E. Borcherding & J. Stephen Ferris & Andrea Garzoni, 2001. "Growth in the Real Size of Government since 1970," Claremont Colleges Working Papers 2001-30, Claremont Colleges.
- Thomas E. Borcherding & J. Stephen Ferris & Andrea Garzoni, 2001. "Growth in the Real Size of Government Since 1970," Carleton Economic Papers 01-06, Carleton University, Department of Economics.
- Andrew Pickering & James Rockey, 2011. "Ideology and the Growth of Government," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 907-919, August.
- Andrew Pickering & James Rockey, 2007. "Ideology and the Growth of Government," Bristol Economics Discussion Papers 07/599, Department of Economics, University of Bristol, UK.
- Bentolila Samuel & Saint-Paul Gilles, 2003. "Explaining Movements in the Labor Share," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-33, October.
- Bentolila, Samuel & Saint-Paul, Gilles, 1998. "Explaining Movements in the Labour Share," CEPR Discussion Papers 1958, C.E.P.R. Discussion Papers.
- Samuel Bentolila & Gilles Saint Paul, 1999. "Explaining movements in the labor share," Economics Working Papers 374, Department of Economics and Business, Universitat Pompeu Fabra.
- Bentollia, S. & Saint-Paul, G., 1999. "Explaining Movements in the Labor Share," Papers 9905, Centro de Estudios Monetarios Y Financieros-.
- Elsa Pilichowski & Edouard Turkisch, 2008. "Employment in Government in the Perspective of the Production Costs of Goods and Services in the Public Domain," OECD Working Papers on Public Governance 8, OECD Publishing.
- James Buchanan & Gordon Tullock, 1977. "The expanding public sector: Wagner squared," Public Choice, Springer, vol. 31(1), pages 147-150, September.
- Stanley Winer & Michael Tofias & Bernard Grofman & John Aldrich, 2008. "Trending economic factors and the structure of Congress in the growth of government, 1930–2002," Public Choice, Springer, vol. 135(3), pages 415-448, June.
- Edwin G. West, 1991. "Secular Cost Changes and the Size of Government : Towards a generalized Theory," Carleton Economic Papers 91-05, Carleton University, Department of Economics, revised Aug 1991.
- West, Edwin G., 1991. "Secular cost changes and the size of government : Towards a generalized theory," Journal of Public Economics, Elsevier, vol. 45(3), pages 363-381, August.
- Cameron A. Shelton, 2007. "The Size and Composition of Government Expenditure," Wesleyan Economics Working Papers 2007-002, Wesleyan University, Department of Economics.
- Borcherding, Thomas E., 1985. "The causes of government expenditure growth: A survey of the U.S. evidence," Journal of Public Economics, Elsevier, vol. 28(3), pages 359-382, December.
- James Kau & Paul Rubin, 1981. "The size of government," Public Choice, Springer, vol. 37(2), pages 261-274, January. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:yor:yorken:13/02. 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: (Paul Hodgson)
If references are entirely missing, you can add them using this form.