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Government Transfers and Growth: Is there Evidence of Genuine Effect?

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  • Sefa Awaworyi
  • Siew Ling Yew

Abstract

This paper investigates how government transfers affect economic growth. Using meta-analysis techniques, we systematically review 24 primary studies with 164 estimates that examine the effect of government transfers on economic growth. After addressing heterogeneity and issues of publication bias in the existing literature, we find a negative association between government transfers and growth. This negative growth impact of government transfers also holds for developed countries. Meta-regression results also reveal that the effect size of reported estimates largely depends on individual study characteristics. In particular, data time period, measure of government transfers, econometric specification and underlying theoretical models are important factors that explain the variations in the empirical results.

Suggested Citation

  • Sefa Awaworyi & Siew Ling Yew, 2014. "Government Transfers and Growth: Is there Evidence of Genuine Effect?," Monash Economics Working Papers 40-14, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2014-40
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    More about this item

    Keywords

    Transfers; Welfare policy; Social security; Taxes; Economic growth;
    All these keywords.

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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