Search

This article documents the determinants of local government size corresponding with the work experience of political leader. Utilizing the city level data on the size of government and political officials in China, government size is found to be negatively associated with local political leaders' work experience in business. This relationship holds more firmly in poor cities or those with stronger fiscal decentralization. Moreover, we find evidence supporting that both fiscal decentralization and the size of public funded system contribute to the expansion of government. [ABSTRACT FROM AUTHOR]

The theoretical and empirical links between optimum government size and economic growth have been widely debated in the economic literature, with the Barro-Armey-Rahn-Scully (BARS) curve positing a nonlinear nexus between the two variables. However, empirical evidence on the nonlinearity of the government size-economic growth nexus and the growth-maximizing government size, with specific focus on Sub-Saharan Africa, is scarce. This paper, therefore, tests the validity of the BARS curve and investigates the optimum government size needed to avert growth reversal across Sub-Saharan African income groups. The panel quantile regression model was adopted to estimate relevant data covering 2000–2020 obtained from reputable international databases. The results showed mixed findings but validated the postulation of the BARS curve in low-income and lower-middle income countries. The results are sensitive to the choice of government size indicator and vary across quantiles and income groups. In sum, the results showed that government size must be barred to a certain threshold to avert growth reversal. Therefore, fiscal policy instruments should be used circumspectly to ensure sustainable economic growth across Sub-Saharan African countries, irrespective of their income group. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to identify the driving elements of the South African financial sector. While South Africa's financial sector appears robust, there exists a dearth of empirical research investigating the determinants of its development. Thus, this work assesses how three critical factors: natural resource abundance (NR), IT infrastructure, and government expenditure levels affect financial development (FD) in South Africa using annual data from 1971 to 2020. Preliminary findings show that the series are integrated, and they are cointegrated. Results from regression analysis suggest that the abundance of NR does not significantly contribute to financial development in South Africa. Conversely, advanced IT infrastructure, larger government size, and openness to trade are associated with a more developed financial sector. The implications of these findings are essential for policymakers and stakeholders in understanding the factors that drive financial development in South Africa. The study recommends that, among others, innovative approaches are needed to channel gains from natural resources effectively into the financial sector. [ABSTRACT FROM AUTHOR]

As a provider of public goods and a corrector of externalities, the government has a significant effect on the local environment. Based on annual province-level data from 1998 to 2015, this paper decomposes the changes in sulfur dioxide emissions into end pollution control effects and source pollution control effects by a complete decomposition model. It then uses a spatial econometric model to investigate how government size expansion affects sulfur dioxide emissions. The results show that under the promotion system based on appointment, the local government size and the neighboring government size are not conducive to reducing local sulfur dioxide emissions. With the expansion of the government size, the degree of environmental degradation caused by competition among governments is more serious. In the way of influence, the impact of local government size on the sulfur dioxide emissions is mainly through restraining the effect of end pollution control. The impact of neighboring government size on the sulfur dioxide emissions is mainly through weakening the effect of source pollution control. [ABSTRACT FROM AUTHOR]

The centuries-old debate on big versus limited government continues to rage unabated worldwide. The findings of a few studies that have examined spending and employment relating to government size in China are mixed. Adopting a "subjective" perspective for evaluating the effect of government size, this paper shows that the likelihood of Chinese citizens being satisfied with three publicly provided services increases with more government expenditures but fewer government employees. Moreover, regardless of spending or employment measures, the relationship between citizen satisfaction and government size takes a quadratic form overall. Our findings accommodate both the welfare state and public choice views on the effect of government size on individual well-being. [ABSTRACT FROM AUTHOR]

This study examines the impact of rule of law and government size under the dimensions of economic freedom to the social and financial efficiency of microfinance institutions (MFIs) from Thailand, Philippines, Malaysia, Indonesia, and Cambodia 2011 to 2018. The Data Envelopment Analysis (DEA) approach has been applied to identify the efficiency level of MFIs. At the same time, the Pooled Ordinary Least Square (PoOLS) and Generalized Least Square (GeLS) methods comprising the Fixed Effect (FEMod) and Random Effect (REMod) models are used to examine the impact of dimensions of economic freedom and potential determinants on the efficiency level of MFIs. Overall, the results revealed that the technical efficiencies for both social and financial efficiency are contaminated by managerial inefficiency, which is measured by pure technical efficiency. This indicates, although the MFIs had been operating on a relatively optimal scale, they were facing the inefficiency from the managerial side. Besides, the results from the panel regression analysis have implied that both property rights and government integrity under the measurement of rule of law positively influence the MFIs' financial efficiency. Meanwhile, the impact of government size shows both tax burden and government spending are significantly positive to the social efficiency of MFIs. As the policy implication, the information provides suggestion to the government on how its role can help in improving the efficiency level of MFIs and implements some useful initiatives to help MFIs to sustain in the long term. In addition to that policymakers can identify the relevant inputs of MFIs and thus revise the policy accordingly and design new policies and regulations based on different economic freedom dimensions. The results of the present study provide a reference to guide them in decision making on their investments. For academicians or researchers, they can obtain more information regarding the efficiency of MFIs that is valuable for further research or study. [ABSTRACT FROM AUTHOR]

This article examines the effect of cross-border mergers and acquisitions (M&A) outflows on government size in home countries. We focus on up to 89 developed and developing economies during the period 1996–2018. The results show that cross-border M&A outflows decrease the government size in total sample as well as in sub-samples of developed and developing countries. The results are stable across different econometric specifications and provide support to the efficiency hypothesis. [ABSTRACT FROM AUTHOR]

The research for this paper was conducted in order to investigate the optimal size of government as well as its effect on economic growth in selected MENA and developing countries over the period from 1988 to 2016. The results reveal that there is a government expenditure threshold effect on economic growth for all panel groups. Indeed, in accordance with an important body of recent literature, the threshold is between 10% and 30% for the whole sample, between 20% and 30% for MENA countries and between 10% and 20% for developing countries. The results obtained from the CS-ARDL model, recently developed by Chudik et al. (2017. Is There a Debt-threshold Effect on Output Growth? Review of Economics and Statistics, 99(1), 135–150. doi:10.1162/REST_a_00593), also showed that the relationship between government expenditure and economic growth is non-linear. Hence, we have found evidence of an inverted U shaped relationship between government expenditure and economic growth. [ABSTRACT FROM AUTHOR]

Utilising Oates' fiscal federalism theorem, the Tiebout model and Berry's common pool model, this paper examines the effects of four characteristics of a macro level governing structure on public sector employment using a mixed method approach. Regression analysis explores the individual effect of fiscal decentralisation, spatial fragmentation, interjurisdictional competition and jurisdictional overlap on the levels of local public employment; and the qualitative comparative analysis explores the complexities between the four macro characteristics and their combined relations to the levels of state public employment. The results of the statistical analysis suggest that more labour inputs are required to produce public goods and services to meet the needs of local residents. Moreover, the qualitative comparative analysis reveals causality asymmetry between these characteristics and highlights how different interactions of characteristics of a macro level governing structure affect different levels of public sector employment. [ABSTRACT FROM AUTHOR]

Confronted with an economic decline or slower growth rates in crisis and post-crisis periods, CEE governments have searched for new means to re-launch growth. The aim of this work is to evaluate the extent to which government arrangements sustain economic growth in CEECs. The centralized economy legacy and crisis related pressures on public budgets make this objective to be challenging. Results indicate an idiosyncratic relationship between government arrangements and economic growth in CEE countries, compared to other countries. We found that government size is the key piece of government settings in CEE. It exerts a strong negative influence upon growth by reducing total factor productivity. On the other hand, government effectiveness, in spite of its positive evolution, does not represent a relevant CEE growth determinant when considered alone. Public sector quality induces growth only when it is accompanied by a small government size. The paper presents the implications of our research and provides some policy suggestions. [ABSTRACT FROM AUTHOR]

The effects of fiscal decentralization on economic growth are analyzed. A theoretical framework is developed that builds on the relationships between government size and growth and between decentralization and government size. The framework is tested empirically on a panel of 25 European countries observed between 1995 and 2015. The econometric results show that the relationship between expenditure decentralization and growth is bell shaped. The paper also focuses on expenditure composition. In this respect, the relationship between investment decentralization and growth is an inverted bell-shaped curve: there is a critical mass of decentralized investments beyond which it is possible to enhance growth. [ABSTRACT FROM AUTHOR]

This paper investigates the relationship between government size and economic growth and determines the optimal level of government spending to maximize economic growth. The paper applies a dynamic panel data analysis based upon a threshold model to test the threshold effect of government spending in 26 transition economies over the period spanning 1993-2016. According to the analysis results, government expenditures have a threshold effect on economic growth, and there is a non-linear relationship depicted as an Armey curve in these transition economies. The findings indicate that a government size above the threshold government spending level adversely affects economic growth, while a government size below the threshold level has a positive effect. Furthermore, there is a statistically significant relationship between the two variables above and below that optimal level, even if we divide the sample into developed and developing countries. Our findings suggest that governments in transition economies should consider optimal government size at around the estimated threshold level to support sustainable economic growth. [ABSTRACT FROM AUTHOR]

The topic of the optimal government size has been extensively examined at both theoretical and empirical levels, however, it has not been researched for the Egyptian economy mainly due to the lack of consistent fiscal data over a relatively long period. Using time series dataset for the Egyptian economy over the time period from fiscal year 1981/1982 to fiscal year 2014/2015, this paper aims to test empirically whether there exists an optimal government size for Egypt, and to estimate that optimal size if it exists. Based on the two specifications of 'Scully model' and the 'quadratic equation model', the estimation results indicate that the relationship between the government size and economic growth in Egypt can be represented by the inverted U-shaped Armey curve. The estimated optimal size of government ranges from 30.5 to 31.2 percent of GDP indicating that the current size of Egypt's Government is neither too big nor too small from the perspective of economic growth maximisation. [ABSTRACT FROM AUTHOR]

Research has shown that neoliberal economic policies may increase violence. In this study we extend this logic to create a "neoliberalism-homicide hypothesis." We test this hypothesis using two global measures of neoliberalism (the Economic Freedom of the World Index and the Index of Economic Freedom) and 2014 homicide rates for 142 nations. Regression analysis provides little support for the neoliberalism-homicide hypothesis using the global indexes. However, when examining factors that make up these indexes we discover that as size of government and tax burden become more neoliberal across nations, homicide rates increase. A post hoc exploratory analysis suggests that the association between government size, spending, taxes, and homicide is largely indirect and manifests through economic inequality and poverty. That is, neoliberal government policies appear to increase poverty and inequality which, in turn, lead to higher rates of homicide. We situate our findings within the broader literature on neoliberalism and violence and suggest directions for future research. [ABSTRACT FROM AUTHOR]

This article empirically investigates the effect of globalization on government size and debt. Using panel heterogeneous cointegration techniques to a panel of developing and developed countries, it finds that globalization reduces government size and debt. In terms of components of globalization, government size is found to increase with trade openness but decreases with financial, social and political globalization. On the other hand, government debt increases with financial and trade openness but decreases with social and political globalization. The evidence is robust to different estimation methods and different samples. Our data also indicate unidirectional causality running from globalization measures to government size and debt. [ABSTRACT FROM AUTHOR]

The aim of this study is to empirically assess the relationship among government size, decentralization and economic growth in Italian ordinary regions. The empirical analysis, based on a panel dataset on Italian regions, provides evidence in support of the existence of an inverted U-shaped relationship between public expenditure and economic growth, that depends on the degree of fiscal decentralization. In particular, according to our estimates on the specific Italian case, the optimal degree of decentralization is around 32%, while the optimal government size value is approximately 52%. [ABSTRACT FROM AUTHOR]

This article presents an empirical analysis of the recent impact of fiscal decentralization in Europe on total expenditure for specific government functions as well as on total government size. A panel data set for the years 2000–2009 for European countries has been constructed from EUROSTAT data. The effects of decentralization interact with the degree of vertical imbalances and tend to be negative as predicted by the Leviathan view of government. Effects vary strongly across government functions and are strongest in relative terms for social spending and infrastructure. Moderate restraining effects are found for education, while health spending is not significantly affected. This is consistent with competition between subnational entities, which try to attract taxpayers and shift expenses away from policies that benefit neighbouring jurisdictions. [ABSTRACT FROM PUBLISHER]

Unlike corruption, government size has not been studied in the Philippines despite numerous literature suggesting relationship between the two. This study fills that gap by looking at state spending and how it relates to the enduring political issue of public corruption. Findings suggest that, contrary to expectations, bigger disbursements actually improve public's perception of bureaucratic corruption, similar to the effect of better institutions and rule of law. [ABSTRACT FROM AUTHOR]

This study examines the effects of greenfield foreign direct investment (FDI) and cross-border mergers and acquisitions (M&As) on government size in host countries of FDI. Using panel data for up to 130 countries for the period from 2003 to 2011, the study specifically tests thecompensation hypothesis, suggesting that by increasing economic insecurity, economic openness leads to larger government size. It is found that greenfield FDI increases labour market volatility and thereby economic insecurity while M&As are not significantly associated with labour market volatility. The main results of this study are that greenfield FDI has a robust positive effect on government size, while M&As have no statistically significant effect on government size in the total sample of developed and developing countries, as well as in the sub-samples of developed and developing countries. [ABSTRACT FROM PUBLISHER]

This paper examines the relationship between economic liberalization and income inequality in the EU using panel data for the 2000s. The empirical evidence suggests that economic freedom is strongly related to income inequality. However, not all areas of economic freedom affect income distribution similarly. Government size is robustly associated with inequality, and also when controlling for potential endogeneity in a dynamic panel data analysis. Regulation is linked to income inequality as well, whereas legal system and sound money have no significant effects on income distribution. In the case of freedom to trade internationally, the relationship differs between old (EU-15) and new (former socialist) EU countries. [ABSTRACT FROM AUTHOR]

This article provides empirical evidence regarding the effect of the size of government on economic growth in the Brazilian economy for the period from January 2000 to March 2013. In particular, an analysis is conducted to see whether the Armey curve fits well for the Brazilian case and the optimal government size is also estimated. The findings indicate that an increase in the size of government contributes to economic growth and that the optimal size for the Brazilian government would be approximately 22% of GDP. Brazil crossed over this limit in 2005. [ABSTRACT FROM AUTHOR]

The author comments on various perspective of complex government including scholars, interest groups, and policy-makers. It mentions that governments divide responsibilities into specialist subsectors and broad sectors. It informs that complex government relates to several factors including proliferation of rules, size of government, and public interaction in a changeable policy environment.

The goal of this article is to discover binding constraints to economic growth in Croatia relating to government. Following a growth diagnostics framework, we limit our analysis to government size and efficiency as potential constraints to growth. We calculate the optimal size of government and estimate the efficiency of government spending by applying data envelopment analysis and Tobit regression models. Apart from Croatia, our results also relate to other European Union member states, Iceland and Norway. We find that a binding constraint to Croatia's economic growth is not a big government but rather a weak government plagued by corruption. The average optimal size of government in old EU member states is larger than that in new EU member states but the former need to cut their government expenditure more sharply in order to reach the optimal size. Their government spending on economic growth factors is however more efficient on average than that of the latter countries. [ABSTRACT FROM AUTHOR]

Political Action Committees (PACs) are unique and prominent players in American politics. Yet, formal research on some aspects of PACs is lacking. Using US data over the period 1970 to 2009, this research demonstrates that the growth in PACs is positively associated with greater corruption. A 10% increase in the number of PACs per capita would increase corruption by about 8%. Upon disaggregation, corporate PACs, rather than labour PACs, are positively associated with corruption. The effects of economic prosperity, government size and population on US corruption are generally in line with the literature. [ABSTRACT FROM AUTHOR]

It has long been argued that big government leads to freedom lost. Guess what: The author, after careful analysis, shows that it is often the opposite. Higher taxes, in particular, mostly lead to more freedom, even according to conservative indices of freedom. [ABSTRACT FROM AUTHOR]

This article addresses whether the growing prevalence of public sector unions exerts effects that spill over to the private sector. The hypothesis that higher prevalence erodes business climate is tested on an index of CEO ratings of the best and worst states in which to conduct business. Evidence indicates that business climates are inversely related to public sector union prevalence. An implication is that erosion of business climates should be a concern to union members as well since they rely on businesses, their employees and customers to pay for government. [ABSTRACT FROM PUBLISHER]

Theoretical developments, improved methodologies and more extensive data have helped generate a dramatic increase in the literature testing for the impact of government size and fiscal policy on economic growth in recent years. We review a range of the more recent evidence and examine (1) the consistency or robustness of the results, (2) how these results differ from the earlier literature and (3) their usefulness as a guide to policy reform in practice. We find that the last decade has produced more robust evidence and more plausible orders of magnitude on the impact of fiscal policy on growth. However, the value of this evidence remains limited as a basis for quantifying macro-economic responses to fiscal policy reform in practice. [ABSTRACT FROM AUTHOR]

Although various studies have concluded that public sector unions raise wages and employment for members, very little research has examined whether public sector unionism influences the overall size of state and local government. The relationship is examined within a pooled data set on all states over selected years during 2003–2010. Wide variation in union membership trends across states provides a rich data set to examine. Empirical results indicate that 10 percentage point increases in public union membership raise several measures of government size within a range of 2.25–4.25%. A similar increase in union membership is estimated to raise annual real wages by $1603 for the average government worker, which amounts to a rise of 3.48%. [ABSTRACT FROM PUBLISHER]

This paper investigates inflation thresholds that lead to higher growth rates using five-year averages of standard variables for 84 countries from 1965 to 2004. The historical experience has important policy implications for developing countries: (i) the catch-up effect has worked only when inflation is below 12%; (ii) the positive effect of human capital on growth has been present and significant when inflation has been below 15%; (iii) financial development has been effective only when inflation has been below 10%; (iv) government size has negatively affected growth when inflation has been below 10%; (v) trade has positively affected growth when inflation has been below 8%. [ABSTRACT FROM AUTHOR]

A significant positive influence of both government size and domestic investment on economic growth is found in the long run during 1970–2006 for a sample of 19 emerging market economies, employing panel co-integration testing and estimating the parameters using dynamic ordinary least square method, for all the indicators, excepting the case when one chooses general government final consumption expenditure as a percentage of GDP a measure of government size and gross capital formation as a percentage of GDP a measure of domestic investment, with per capita GDP a proxy for economic growth. The findings corroborate the argument that diverse results of the earlier studies are due to different measures adopted. [ABSTRACT FROM AUTHOR]

We study the relevance of fiscal rules for growth in an European Union (EU) panel. Our results show that they foster growth, while stricter fiscal rules mitigate the adverse impact on growth from big governments. Moreover, more recent EU member states have gained from the implementation of fiscal rules. [ABSTRACT FROM AUTHOR]

We show that banking crises have an important effect on income distribution: inequality increases before banking crisis episodes and sharply declines afterwards. We also find that, while a large government size does not per se seem to reduce inequality, a rise in financial depth (i.e. better access to credit provided by the banking sector) contributes to a more equal distribution of income. [ABSTRACT FROM PUBLISHER]

In this article, we examine the effects of three openness measures on 54 industrial and emerging economies' output growth over the “globalization years” of 1986–2004. Controlling for standard determinants of the Solow growth model in panel data, we find positive effects of openness on real output growth. While we find support for higher convergence rates under the open economy, the convergence rates in this article for both samples are remarkably close to the 2% level documented in Mankiw et al. (1992). The inclusion of G/Y, however, reduces the speed of convergence more substantially in industrial economies. [ABSTRACT FROM PUBLISHER]

This paper uses individual level data from the Japanese General Social Survey to examine how government size influences generalized trust. After controlling for the endogeneity of government size using instrumental variables, I found: (1) using all samples, government size is not associated with generalized trust, and (2) after splitting the sample into workers and non-workers, government size does not influence generalized trust for non-workers, whereas it significantly reduces generalized trust for workers. This suggests that workers, through their work experience, might have to face greater bureaucratic red tape coming from “larger government,” leading to negative externality effects on relationships of trust in the labor market. [ABSTRACT FROM AUTHOR]

This study uses Japanese prefecture-level data for the years 1979 and 1996 to examine how the relationship between government size and life satisfaction changes. The major findings are: (1) Government size has a detrimental effect on life satisfaction when government size impedes economic growth in the economic developing stage. However, this effect clearly decreases when government size is not associated with economic growth in the developed stage. (2) Particularized trust is positively associated with life satisfaction of females but not with that of males. Such a tendency becomes more remarkable in the developed stage. These results are unchanged when the endogeneity bias caused by local government size and proxies of trust are controlled for. [ABSTRACT FROM AUTHOR]

An introduction to the journal is presented in which the editor discusses various reports within the issue on topics including government size and globalization, short-run and long-run evidence regarding income inequalities and international trade, learning-by-exporting and tax havens.