30 results on '"GOVERNMENT size"'
Search Results
2. International Trade and the Size of the Government
- Author
-
Acharyya, Rajat, Roy, Malabika, editor, and Sinha Roy, Saikat, editor
- Published
- 2016
- Full Text
- View/download PDF
3. Oil depletion and quality of democracy in selected Middle-East countries*.
- Author
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Agheli, Lotfali
- Subjects
PETROLEUM ,DEMOCRACY ,TRANSPARENCY in government ,TECHNOLOGY - Abstract
Oil-abundant countries, Iran, Iraq and the Gulf Cooperation Council (GCC) countries try to improve democratic institutions and to manage their chronically big governments, while experiencing decreased world oil prices. These countries pursue open door policies. Most of the foreign revenues of the region stem from oil and gas exports. Thus, how to manage the production and exports of fossil resources is of great importance. This study aims to analyse the effects of quality of democracy, government size, and the degree of openness in explaining depletion of reserves between 1985 and 2015. After testing for panel unit root and co-integration, a panel data model was estimated considering random effects. The results indicate that democratisation and political stability causes higher depletion of oil. In addition, government size affects depletion in a non-linear form, so that oil production is maximised, when government expenditure accounts for nearly 14% of GDP, on average. Furthermore, trade openness positively impacts on the oil depletion. In this case study, higher oil depletion follows strengthening democratic foundations, resizing the public sector, expanding politico-economic ties with trade partners, and applying the modern technology in the upstream oil industries. [ABSTRACT FROM AUTHOR]
- Published
- 2018
- Full Text
- View/download PDF
4. Growth in the Real Size of Government Since 1970
- Author
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Borcherding, Thomas E., Ferris, J. Stephen, Garzoni, Andrea, Backhaus, Jürgen G., editor, and Wagner, Richard E., editor
- Published
- 2004
- Full Text
- View/download PDF
5. Who benefits from big government? A life satisfaction approach.
- Author
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Knoll, Bodo and Pitlik, Hans
- Subjects
SATISFACTION ,GOVERNMENT size ,PUBLIC spending ,SOCIAL surveys ,INCOME - Abstract
Which impact does government size have on life satisfaction, and how do effects of bigger government differ between income groups in society? Previous studies typically employed country averages and thus neglected possibly heterogeneous happiness effects between income groups. This paper addresses empirically the effects of government spending on subjective well-being of individuals belonging to different income groups. Our analysis is based on individual data from 25 European countries participating in the European Social Survey. In contrast to most previous studies we take account of the endogeneity between relative income position and reported life satisfaction by an instrumental variable approach. Our results suggest, first, that most government spending categories, including social protection, are on average negatively related to individual well-being. Secondly, estimated marginal effects of health, education and social protection spending at different income levels show that spending increases always have a stronger negative effect on high income groups' well-being than on low income groups' life satisfaction. For all government spending categories, marginal happiness effects of higher public spending are clearly negative for income groups at the top. [ABSTRACT FROM AUTHOR]
- Published
- 2016
- Full Text
- View/download PDF
6. Economic performance, government size, and institutional quality.
- Author
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Afonso, António and Jalles, João
- Subjects
ECONOMIC activity ,GOVERNMENT size ,PRODUCTION functions (Economic theory) ,ECONOMIC impact ,ECONOMETRICS - Abstract
This paper studies the empirical link between government size, institutions and economic activity using a panel of 140 countries over 40 years. Our results, robust under different econometric techniques, show mostly a negative effect of government size on output, while institutional quality has generally a positive impact. Moreover, the detrimental effect of government size on economic activity is stronger the lower institutional quality, and the positive effect of institutional quality on output increases with smaller government sizes. [ABSTRACT FROM AUTHOR]
- Published
- 2016
- Full Text
- View/download PDF
7. War and the growth of government.
- Author
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O'Reilly, Colin and Powell, Benjamin
- Subjects
- *
FISCAL policy , *EMPIRICAL research , *ECONOMIC development , *FINANCIAL liberalization , *GOVERNMENT size , *ORGANIZATIONAL change - Abstract
This paper empirically examines how wars impact the size and scope of government using a panel of all wars from 1965 to 2010. Higgs (1987) gives us reason to believe that wars may permanently increase government size and scope while Olson (1982) describes how wars can dislodge interest groups and allow for market liberalizing reforms. We find that wars permanently expand the scope of government regulation but do not impact government size systematically across the countries we study. [ABSTRACT FROM AUTHOR]
- Published
- 2015
- Full Text
- View/download PDF
8. Firm profits and government activity: An empirical investigation
- Author
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Branimir Jovanovic, Petar Jolakoski, Viktor Stojkoski, Joana Madjoska, and Dragan Tevdovski
- Subjects
Government ,media_common.quotation_subject ,firm profits ,government effectiveness ,Instrumental variable ,Monetary economics ,Power (social and political) ,government size ,Empirical research ,State (polity) ,Negative relationship ,Economics ,Homogeneous group ,ddc:330 ,Market power ,H11 ,H50 ,media_common ,C23 - Abstract
Recent studies suggest that firm profits have risen to a level far above than what would have been earned in a competitive economy. It has been hypothesized that these profits, generated by market power, allow firms to influence the activity of the government. However, despite an abundance of theoretical investigations, the empirical examinations for the validity of this hypothesis have been largely neglected. Against this background, here we perform a detailed empirical study on the potential effects of firm profits and markups on government size and effectiveness. Using data on 30 European countries for a period of 17 years and an Instrumental Variables approach, we find that there exists a robust and stable negative relationship between firm gains and the activity of the state. Our results indicate that, even in such a homogeneous group of countries, firm power may dictate the decline in state activity and, successively, lead to emergence and persistence of inefficient states.
- Published
- 2021
9. Legitimacy and the cost of government.
- Author
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Berggren, Niclas, Bjørnskov, Christian, and Lipka, David
- Subjects
LEGITIMACY of governments ,GOVERNMENT size ,PUBLIC spending ,DEMOCRACY ,REPRESENTATIVE government ,POLITICAL trust (in government) ,PANEL analysis ,ECONOMICS - Abstract
While previous research documents a negative relationship between government size and economic growth, suggesting an economic cost of big government, a given government size generally affects growth differently in different countries. As a possible explanation of this differential effect, we explore whether government legitimacy (measured by satisfaction with the way democracy works) influences how a certain government size affects growth. On the positive side, a government perceived as legitimate may 'get away' with being big since legitimacy can affect behavioral response to, and therefore the economic growth cost of, taxation and government expenditures. On the negative side, perceived legitimacy may make voters less prone to acquire information, which in turn facilitates interest-group oriented or populist policies that harm growth. A panel-data analysis of up to 30 developed countries, in which two different measures of the size of government are interacted with government legitimacy, reveals that perceived legitimacy exacerbates a negative growth effect of government size in the long run. This could be interpreted as governments taking advantage of being regarded as legitimate in order to secure short-term support at a long-term cost to the economy. [ABSTRACT FROM AUTHOR]
- Published
- 2015
- Full Text
- View/download PDF
10. Volatility and growth: Governments are key.
- Author
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Jetter, Michael
- Subjects
- *
MARKET volatility , *ECONOMIC development , *BUSINESS cycles , *GOVERNMENT size , *MUNICIPAL services , *REGIME change , *DEMOCRACY - Abstract
There exists a persistent disagreement in the literature over the effect of business cycles on economic growth. This paper offers a solution to this disagreement, suggesting that volatility carries not only a positive direct effect, but also a negative indirect effect, operating through the insurance mechanism of government size. Theoretically, the net growth effect of volatility is then ambiguous. The paper reveals the underlying endogeneity of government size in a balanced panel of 90 countries from 1961 to 2010. In practice, the negative indirect channel dominates in democracies, but with less power to choose public services in autocratic regimes the positive direct effect takes over. Consequently, volatile growth rates are detrimental to growth in democracies, but beneficial to growth in autocracies. The empirical results suggest that a one standard deviation increase of volatility lowers growth by up to 0.52 percentage points in a democracy, but raises growth by 1.66 percentage points in a total autocracy. These findings point to a crucial intermediating role of governments in the relationship between volatility and growth. Both the size of the public sector and the regime form assume key roles. [ABSTRACT FROM AUTHOR]
- Published
- 2014
- Full Text
- View/download PDF
11. Fiscal federalism, jurisdictional competition, and the size of government.
- Author
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Sorens, Jason
- Subjects
GOVERNMENT size ,WELFARE state ,PUBLIC spending ,DECENTRALIZATION in government ,FISCAL policy - Abstract
Fiscal federalism is commonly held to reduce the size of government, but how does it do so: through shrinking the welfare state, cutting government consumption, or reducing public investment? This paper examines tax competition under fiscal federalism through the lens of imperfect competition theory, derives new empirical implications from different theories of fiscal federalism, and tests those hypotheses with new variables and data. Cross-national statistical results show that jurisdictional competition under fiscal federalism is associated with reductions in the administrative expense of government but not the size of the welfare state. Moreover, the apparent impact of fiscal federalism with a high degree of jurisdictional competition is larger than that estimated in previous research. Once the models have been appropriately specified, the United States is no longer an outlier among high-income democracies on either government consumption or social spending. Close examination of the data reveals that some fiscally federal systems better approximate a 'market-preserving model' and others a 'capital-privileging' or 'state-corroding' model. [ABSTRACT FROM AUTHOR]
- Published
- 2014
- Full Text
- View/download PDF
12. The Effect of Community Size on Electoral Preferences: Evidence From Post-WWII Southern Germany
- Author
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Fiorini, Luciana C., Jetter, Michael, Parmeter, Christopher F., and Parsons, Christopher
- Subjects
N44 ,government size ,D61 ,D72 ,voting preferences ,community size ,ddc:330 ,public good provision ,H11 - Abstract
Populous communities often prefer more government involvement than less populous communities, but does community size per se affect citizens' preferences for government? Endogeneity commonly prevents testing for causal effects because (i) people can select into communities while (ii) government structures can affect community size (e.g., by en- or discouraging migration and fertility decisions). This paper studies a plausibly exogenous setting from post-WWII Baden-Württemberg (located in Southern Germany), in which the French occupation zone prevented the entry of German expellees after 1945, whereas the U.S. occupied zone did not. Consequently, municipalities on the U.S. side, just across the border from the French zone, experienced large and relatively homogenous population shocks. Studying voting patterns in the 1949 national- and 1952 state-level elections for 828 municipalities, we find more populous municipalities systematically preferred the SPD (Sozialdemokratische Partei Deutschlands), the party advocating for greater government involvement in virtually all areas of policymaking, over the CDU (Christlich Demokratische Union), the major conservative party that emphasized free markets. Our results hold when accounting for a host of potential confounding factors, county-fixed effects, pre-WWII vote shares, employing fractional response models and alternative instrumental variable specifications. Our benchmark estimates imply that a one standard deviation increase in population size (equivalent to ≈4,000 citizens) raised the SPD vote share by more than 11 percentage points.
- Published
- 2020
13. Voter preferences, direct democracy and government spending.
- Author
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Funk, Patricia and Gathmann, Christina
- Subjects
- *
VOTERS , *DEMOCRACY , *PUBLIC spending , *GOVERNMENT size , *FEDERAL government - Abstract
Abstract: This article uses unique voting data on 331 federal propositions to estimate voter preferences in Swiss cantons. We document that preferences vary systematically with cantonal characteristics. In particular, cantons whose voters are more conservative, less in favor of redistribution and less supportive of public spending tend to have stronger direct democracy. We show that voter preferences have a stable and sizable effect on government spending even conditional on many observable cantonal characteristics. We then revisit the relationship between direct democracy and public spending. Once we fully control for voter preferences, the cross-sectional correlation between direct democracy and government spending declines by roughly 20%. The results in this article provide empirical support for models, in which both voter preferences and direct democratic institutions are important determinants of the size of government. [Copyright &y& Elsevier]
- Published
- 2013
- Full Text
- View/download PDF
14. Do public sector unions erode business climates?
- Author
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Marlow, MichaelL.
- Subjects
PUBLIC sector ,WORK environment ,GOVERNMENT size ,BUREAUCRACY ,CHIEF executive officers ,PRIVATE sector - Abstract
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]
- Published
- 2013
- Full Text
- View/download PDF
15. Decentralization as a constraint to Leviathan: a panel cointegration analysis.
- Author
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Ashworth, John, Galli, Emma, and Padovano, Fabio
- Subjects
DECENTRALIZATION in government ,COINTEGRATION ,FISCAL policy ,GOVERNMENT size ,PUBLIC spending ,GOVERNMENT revenue ,MATHEMATICAL models - Abstract
This paper extends the empirical literature about the effects of fiscal decentralization on the growth of government along three dimensions. It distinguishes between the effects of the level of decentralization from the way local governments finance their expenditures (common pool versus own resources); it uses a panel cointegration approach to separate the long run effects of decentralization from the short run dynamics; and it extends and revises the datasets generally used in these empirical analyses. The results show that the amount of revenue raised by sub-national governments leads to a long-term fall in the size of government but grants have the opposite effect. In addition, a greater decentralization of expenditure leads to greater overall spending. When the short-term is considered these influences work slowly, as the speed of adjustment towards the desired government size is relatively sluggish. In addition, in the short run, there is also a clear effect from the role of local revenue raising powers that stimulates the growth of government. These results appear robust to changes in the composition of the variables, countries and periods included the sample. [ABSTRACT FROM AUTHOR]
- Published
- 2013
- Full Text
- View/download PDF
16. The size and scope of government in the US states: does party ideology matter?
- Author
-
Bjørnskov, Christian and Potrafke, Niklas
- Subjects
IDEOLOGY ,GOVERNMENT size ,LABOR market ,TAXATION ,GOVERNMENT regulation ,LEGISLATIVE bodies ,UNITED States politics & government - Abstract
We investigate empirically how party ideology influences size and scope of government as measured by the size of government, tax structure and labor market regulation. Our dataset comprises 49 US states over the 1993-2009 period. We employ the new data on the ideological mapping of US legislatures by Shor and McCarty (Am. Polit. Sci. Rev. 105(3):530-551, ) that considers spatial and temporal differences in Democratic and Republican Party ideology. We distinguish between three types of divided government: overall divided government, proposal division and approval division. The main result suggests that Republican governors have been more active in deregulating labor markets. We find that ideology-induced policies were counteracted under overall divided government and proposal division. [ABSTRACT FROM AUTHOR]
- Published
- 2013
- Full Text
- View/download PDF
17. Political competition versus electoral participation: effects on government's size.
- Author
-
Eterovic, Dalibor and Eterovic, Nicolás
- Subjects
POLITICAL competition ,POLITICAL participation ,GOVERNMENT size ,COMPULSORY voting ,LAW reform ,ECONOMICS & politics - Abstract
From a theoretical standpoint, there are reasons to believe that political competition and electoral participation might have opposite effects on the size of government. We investigate empirically this possibility using data from a panel of 104 countries from 1960. We find that reforms enhancing political competition tend to limit the size of government, while reforms increasing electoral participation tend to increase the size of government. These results are robust for the global sample and across different regions. Our findings reinforce the empirical relevance of the distinction between political competition and participation. [ABSTRACT FROM AUTHOR]
- Published
- 2012
- Full Text
- View/download PDF
18. Determinants of government size: evidence from China.
- Author
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Wu, Alfred and Lin, Mi
- Subjects
GOVERNMENT size ,CHINESE politics & government, 1949- ,BUSINESS ,DECENTRALIZATION in government ,FISCAL policy ,ECONOMIES of scale - Abstract
This paper investigates the determinants of government size at the provincial level in China. We employ the panel data model as a platform for empirical analysis and control for endogeneity in the study. Our study shows that openness to trade and foreign direct investment (FDI) may curtail government expansion, and that the provincial-level public sector is characterized by economies of scale. This study also documents that Wagner's law does not hold true for China. Moreover, both expenditure decentralization and revenue decentralization contribute to the expansion of China's government. [ABSTRACT FROM AUTHOR]
- Published
- 2012
- Full Text
- View/download PDF
19. How economic integration affects the vertical structure of the public sector.
- Author
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Liberati, Paolo and Sciala, Antonio
- Subjects
INTERNATIONAL economic integration ,DECENTRALIZATION in government ,FEDERAL government ,PUBLIC sector ,TAXATION - Abstract
This paper investigates the impact of economic integration on the vertical structure of the public sector within a country. To tackle this issue we set up a model of fiscal federalism, where economic integration is assumed to affect central government tax revenues. The main findings are that when an increase of the impact of economic integration brings about a reduction in central government tax revenues, under certain conditions: (a) it reduces central government expenditure; (b) it reduces general government expenditure; (c) it increases local taxation; (d) it increases the degree of public sector decentralization. Quite interestingly, these results are consistent with different patterns of local public spending and grants to local government. [ABSTRACT FROM AUTHOR]
- Published
- 2011
- Full Text
- View/download PDF
20. Population Size and the Size of Government
- Author
-
Daniel Meierrieks and Tim Krieger
- Subjects
population size ,panel cointegration ,Economics and Econometrics ,Government ,non-stationarity ,cross-sectional dependence ,government size ,Cointegration ,Economics ,Population size ,Ethnic group ,Wirtschaft ,Economies of scale ,Öffentliche Finanzen und Finanzwissenschaft ,Non stationarity ,Public Finance ,Political Science and International Relations ,ddc:330 ,Social conflict ,Demographic economics ,H11 ,Nexus (standard) ,H50 - Abstract
We examine the effect of population size on government size for a panel of 130 countries for the period between 1970 and 2014. We show that previous analyses of the nexus between population size and government size were incorrectly specified, not accounting for cross-sectional dependence, non-stationarity and cointegration as well as parameter heterogeneity. Using a panel time-series approach that adequately models these issues, we find that population size has a positive long-run effect on government size. This finding suggests that the detrimental effects of population size on government size (primarily due to a greater risk of social conflict) dominate its beneficial ones (primarily due to scale economies). We also show that population size increases government size especially in countries that are vulnerable to social conflict due to ethnic heterogeneity.
- Published
- 2019
21. Population size and the size of government
- Author
-
Krieger, Tim and Meierrieks, Daniel
- Subjects
population size ,panel cointegration ,government size ,non-stationarity ,non-stationary ,ddc:330 ,cross-sectional dependence ,H11 ,country size ,social conflict ,H50 ,ethnic fractionalization ,parameter heterogeneity - Abstract
We examine the effect of population size on government size for a panel of 130 countries for the period between 1970 and 2014. We show that previous analyses of the nexus between population size and government size were incorrectly specified, not accounting for cross-sectional dependence, non-stationarity and cointegration as well as parameter heterogeneity. Using a panel time-series approach that adequately models these issues, we find that population size has a positive long-run effect on government size. This finding suggests that the detrimental effects of population size on government size (primarily due to a greater risk of social conflict) dominate its beneficial ones (primarily due to scale economies). We also show that population size increases government size especially in countries that are vulnerable to social conflict due to ethnic heterogeneity.
- Published
- 2019
22. The nexus between size and efficacy of government: evidence from OPEC
- Author
-
AGHELI, Lotfali
- Subjects
Government size ,Government effectiveness ,Trade openness ,Oil rents ,OPEC ,F41 ,F53 ,H11 ,P48 - Abstract
From classic to modern economic theories, the scope and size of government in economy have been always main topics for economists. The governments have played different roles in a historical context. Provision of public goods is a generally accepted task for all governments. The supply of public goods requires efficient allocation and management of scarce resources. Government efficacy stems from good governance and proper planning and policy-making. This paper aims to bridge from government size to government efficacy the Organization of the Petroleum Exporting Countries (OPEC). To this end, a panel data in the model is estimated during 2002-2015 by using some control variables. Findings indicate a negative relationship between government size and efficacy. In addition, oil rents affect government efficacy negatively. The trade openness result in efficient government. Finally, economic growth has positive effect on result in government effectiveness. According to findings, minimization of government size, injection of oil revenues into Sovereign National Funds (SNFs), adoption of open door policies, and targeting sustainable economic growth give rise to an efficient government.Keywords. Government size, Government effectiveness, Trade openness, Oil rents, OPEC.JEL. F41, F53, H11, P48.
- Published
- 2017
23. Government Size and Economic Growth in an Endogenous Growth Model with Rent-seeking
- Author
-
Wadho, Waqar and Ayaz, Umair
- Subjects
O43 ,D72 ,Economic Growth ,D90 ,ddc:330 ,O41 ,J24 ,Human capital ,H11 ,Rent-seeking ,Discounting ,Government size - Abstract
We explore the relationship between government size and economic growth in an endogenous growth model with human capital and an unproductive capital which facilitates rent-seeking. With exogenous as well as endogenous time discounting, we find a non-monotonic relationship between the size of government and economic growth. We find that with very high (low) discounting, there is a unique low (high) growth equilibrium, regardless of the size of government. For the intermediate range of discounting, there are multiple equilibria and the growth outcome depends on the size of government. With endogenous time discounting, the growth outcome is path-dependent and depends on the level of inherited human capital. However, there is only one stable growth regime and the economy endogenously switches to it. When the institutional constraints on rent seeking are not extremely high, the stable regime is the one in which there is a high-growth equilibrium for a smaller size of the government and for larger size, both the high-growth and the low-growth equilibrium coexist. When the institutional constraints on rent seeking are extremely high, there exists only a unique high-growth equilibrium irrespective of the size of government. Furthermore, economies with bigger size of the government and/or with poor quality institutions will take longer to endogenously switch to this stable growth regime.
- Published
- 2017
24. Government size, market-orientation and regional corruption: Evidence from the provincial level panel data
- Author
-
Zhou, Li’an and Tao, Jing
- Published
- 2009
- Full Text
- View/download PDF
25. Fiscal Rules and Government Size in the European Union
- Author
-
Mierau, Jochen O. and Andreu, Eduard Suari
- Subjects
government size ,E61 ,ddc:330 ,fiscal rules ,H11 ,political fragmentation ,H61 - Abstract
This paper studies the impact of national fiscal rules on government size as measured by the ratio of government expenditures to gross domestic product. We develop a model of the budgetary process and show that a common pool problem may arise which can be mitigated through fiscal rules. We test the model’s predictions using a novel time-series cross-section dataset of 27 European Union members for the period between 1990 and 2011. Corroborating the model, we find that fiscal rules have a negative impact on government size. Contrasting the model, their impact becomes smaller as the number of ministers increases.
- Published
- 2014
26. Who benefits from big government? A life satisfaction approach
- Author
-
Knoll, Bodo and Pitlik, Hans
- Subjects
government size ,instrumental variables ,ddc:330 ,health spending ,Life satisfaction ,I31 ,H11 ,social protection ,education spending ,H40 - Abstract
Which impact does government size have on life satisfaction, and how do effects of bigger government differ between income groups in society? Previous studies typically employed country averages and thus neglect possibly heterogeneous happiness effects between income groups. The paper addresses empirically the effects of government spending on subjective well-being of individuals belonging to different income groups. Our analysis is based on individual data from 25 European countries participating in the European Social Survey. In contrast to most previous studies we take account of the endogeneity between relative income position and reported life satisfaction by an instrumental variable approach. Our results suggest, first, that most government spending categories, including social protection, are on average negatively related to individual well-being. Secondly, estimated marginal effects of health, education and social protection spending at different income levels show that spending increases always have a stronger negative effect on high income groups' well-being than on low income groups' life satisfaction. For all government spending categories, marginal happiness effects of higher public spending are clearly negative for income groups at the top.
- Published
- 2014
27. Volatility and Growth: Governments are Key
- Author
-
Jetter, Michael
- Subjects
O43 ,government size ,regime form ,business cycles ,ddc:330 ,volatility ,P16 ,H11 ,economic growth ,E32 - Abstract
There exists a persistent disagreement in the literature over the effect of business cycles on economic growth. This paper offers a solution to this disagreement, suggesting that volatility carries a positive direct effect, but also a negative indirect effect, operating through the insurance mechanism of government size. Theoretically, the net growth effect of volatility is then ambiguous. The paper reveals the underlying endogeneity of government size in a balanced panel of 95 countries from 1961 - 2010. In practice, the negative indirect channel dominates in democracies, but with less power to choose public services in autocratic regimes the positive direct effect takes over. Consequently, volatile growth rates are detrimental to growth in democracies, but beneficial to growth in autocracies. The empirical results suggest that a one standard deviation increase of volatility lowers growth by up to 0.57 percentage points in a democracy, but raises growth by 1.74 percentage points in a total autocracy. These findings point to a crucial intermediating role of governments in the relationship between volatility and growth. Both the size of the public sector and the regime form assume key roles.
- Published
- 2013
28. Benefit or burden? Unraveling the effect of economic freedom on subjective well-being
- Author
-
Gehring, Kai
- Subjects
life Satisfaction ,Welt ,Zufriedenheit ,economic freedom ,330 Economics ,D60 ,government size ,Staatsquote ,Wirtschaftsliberalismus ,ddc:330 ,happiness ,H11 ,A13 ,Schätzung - Abstract
Does economic freedom increase the utility of an average citizen? Public choice theory in particular has emphasized the shortcomings of governments and voting processes, and the advantages of relying on markets and individual decision making. However, an increasing amount of people are refusing to accept classical measures like GDP as signs of improvements in welfare. Data on subjective well-being allow economists to test if economic freedom really does improve the overall quality of life. However, existing studies have either failed to control for necessary control variables or lacked theoretical foundation. This paper explains economic and psychological reasons why the influence of economic freedom reaches beyond material well-being. Empirical results from a panel of 86 countries over the 1990-2005 period suggest that economic freedom indeed has a positive effect on happiness. Specifically legal security and property rights, access to sound money, and freedom from excessive regulation are significantly positive throughout the analysis. Regarding freedom to trade, the results show that particularly regulatory trade barriers have a significant negative effect. The positive effect depends on socio-demographic characteristics and is, on average, stronger for poorer countries and left-wing voters, and varies with age.
- Published
- 2012
29. Government Size and Growth: A Survey and Interpretation of the Evidence
- Author
-
Bergh, Andreas and Henrekson, Magnus
- Subjects
O43 ,Wirtschaftswachstum ,O23 ,Cross-country regressions ,Government expenditure ,Economic freedom ,Government size ,Taxation ,Staatsquote ,ddc:330 ,H20 ,H11 ,E62 ,Globalization ,Economic growth - Abstract
The literature on the relationship between the size of government and economic growth is full of seemingly contradictory findings. This conflict is largely explained by variations in definitions and the countries studied. An alternative approachof limiting the focus to studies of the relationship in rich countries, measuring government size as total taxes or total expenditure relative to GDP and relying on panel data estimations with variation over timereveals a more consistent picture. The most recent studies find a significant negative correlation: An increase in government size by 10 percentage points is associated with a 0.5 to 1 percent lower annual growth rate. We discuss efforts to make sense of this correlation, and note several pitfalls involved in giving it a causal interpretation. Against this background, we discuss two explanations of why several countries with high taxes seem able to enjoy above average growth: (i) that countries with higher social trust levels are able to develop larger government sectors without harming the economy, and (ii) that countries with large governments compensate for high taxes and spending by implementing market-friendly policies in other areas. Both explanations are supported by current research.
- Published
- 2011
30. Growth Effects of Fiscal Policies: A Critical Appraisal of Colombiers (2009) Study
- Author
-
Bergh, Andreas and Öhrn, Nina
- Subjects
O43 ,Wirtschaftswachstum ,Steuereinnahmen ,Regression ,Government size ,Taxation ,OECD-Staaten ,Staatsquote ,ddc:330 ,H20 ,Robust estimators ,H11 ,E62 ,Economic growth ,Panel data - Abstract
In a recent paper, Colombier (2009) uses a robust estimation technique and claims to find empirical evidence that government size has not been detrimental to growth for OECD countries during the 1970 to 2001 period, and that endogenous growth theory is not corroborated. We examine the robustness of these findings, and show that Colombiers results differ from those in other recent papers not because of the estimator used, but because of the exclusion of other control variables. Adding time fixed effects to Colombiers data set, and using the same econometric method, we obtain results in line with other findings, corroborating endogenous growth theory. Adding further control variables illustrates the robustness of the negative correlation between total tax revenue and economic growth for both instrumented and non-instrumented regressions.
- Published
- 2011
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