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Governments implemented fiscal stimulus packages to alleviate the global financial crisis of 2007–2009. Using annual data from 1996 to 2019, we investigate economic growth in a large sample of countries for pre-and post-Global Financial Crisis years. Our approach analyzes the interaction between institutional quality and government size (government expenditures as share of GDP), reinforced by threshold estimations. We document that economies react to government size depending on the quality of the institutions in question. First, fixed effects models indicate higher institutional quality has positive effects on growth, while government size—and its interactions with institutional quality—has negative effects. Second, the coefficients of government size on economic growth are negative with higher institutional quality and become larger in the post-Global Financial Crisis years. These combined results indicate that higher-quality institutions make economies less tolerant of rising government expenditures than lower-quality institutions. Our main findings support institutional quality as the channel through which fiscal policy has real effects. The evidence herein is robust to measures of institutional quality from different databases. [ABSTRACT FROM AUTHOR]

This paper provides new insights into the growth-maximizing size of government in Turkey. Unlike previous studies that traditionally use the share of government spending in GDP as a proxy variable of government size, in this paper we consider a fairly large number of proxy variables ranging from the share of tax revenues in GDP to the share of public investment in total investment. After reviewing the potential non-linear relationship between government size and growth, we estimate various thresholds for government size that maximize growth. To this end, we use the threshold autoregressive model proposed by Hansen (1996: 413-430; 2000: 575-603)) and apply it to Turkey's annual time-series data for the period from 1974 to 2019. Overall, we arrive at the following main result: Government size is non-linearly related to growth, confirming the existence of a growth-maximizing threshold for any measure of government size, beyond which growth tends to slow down as government size continues to increase. More precisely, the results show that the estimated thresholds for government size lie within the range of 4.28–15.19%, depending on the definition or proxy variable representing government size. [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]

Does trade openness systematically imply bigger governments, as proposed by Rodrik (Journal of Political Economy, 106, 997 and 1998)? This paper presents a novel and more refined explanation for when and why international trade may enlarge the public sector. We propose that trade openness is associated with bigger governments via the compensation pathway if i$$ (i) $$ the price volatility of a country's export basket is substantial andii$$ (ii) $$ the country is democratic. The first condition satisfies the prior that trade openness introduces uncertainty and external risk. The second condition ensures that the people's desire for greater economic security can be realised through government spending. Empirical evidence for 137 countries, that account for approximately 95% of world population, from 2000–2016 is consistent with this hypothesis. Exploring areas of public spending, we find intuitive patterns. Consistent with the compensation hypothesis, government spending on economic affairs and housing increases significantly with trade openness, whereas spending on education, health care, and the military is not affected. As with our general result, this is only the case in democracies that are subject to high price volatility on the global market. [ABSTRACT FROM AUTHOR]

This paper empirically investigates how government consumption impacts upon economic growth in Tanzania for the period 1967 – 2020. Autoregressive Distributed Lag (ARDL) bounds cointegration test revealed economic growth and government expenditure were cointegrated, given the conditioning factors; and, revealed a small but statistically significant positive long run effect of government size on economic growth. The pairwise Granger causality test rejected the null hypothesis of no uni-directional or bi-directional causality between the government size and economic growth. The study also established the long run effect of inflation on economic growth was negative and statistically significant. The ECM results reveal the short run effect of government size on economic growth was negative and statistically insignificant; and, the effect of private investment on economic growth was positive and statistically insignificant. Besides, the short run effect of human capital on economic growth was negative and weakly significant. The results revealed a high speed of adjustment from disequilibrium to long run equilibrium. The findings support the conventional view: government consumption lacks significant positive effect on growth over the long run. This finding reveals the limit to the use of fiscal policy especially recourse to government expenditure to prime or stabilize the economy as maintained in Keynesian macroeconomic theory. The gestation period of government consumption is long. Furthermore, the finding underscore importance of price stability and, other things being constant, need for more proactive policies and strategies to avail business and macroeconomic environment that would increase private investment. [ABSTRACT FROM AUTHOR]

Copyright of Hikama is the property of Arab Center for Research & Policy Studies and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This article analyzes the implementation of fiscal limit targets and their influence on government size and productivity of public expenditures in Brazilian municipalities between 2005 and 2016. For this purpose, a panel data model was estimated, using the differences in differences empirical strategy and applying the Fiscal Responsibility Law (FRL), subdivided into three categories as the main interest variable, in order to identify the municipalities that have complied with the payroll limit; those who met the public debt limit; and those who met both limits. Results obtained demonstrated that the adoption of fiscal targets positively affected public finance management through the compliance with public debt limits, as this promotes a reduction in government size. Besides, municipalities that abide to the FRL reduce their government size, whereas their GDP per capita, improves. On the other side, when the municipal manager belongs to same party as the state governor there is an increase in the government size. In view of the results, it is recommended that stricter measures be adopted in the application of the Fiscal Responsibility Law, in order to provide greater efficiency in the management of public spending − smaller government and productive spending −, especially in election years. [ABSTRACT FROM AUTHOR]

In general, many factors, including government spending, influence economic growth. In many theoretical and empirical studies, government spending is seen from the ratio between government spending and Gross Domestic Product (GDP) or government size. This research aims to examine the influence of government size on economic growth in districts/cities of South Sumatra Province. The government size to be analyzed is the amount of government spending on public services, housing and public facilities, education, and health. The data used in this study is secondary data for the 2010-2020 and covers 15 regencies/cities. The data was obtained from the Central Statistics Agency and the Regional Financial and Asset Management Agency. The analytical technique used in this research is descriptive analysis technique and quantitative analysis. Klassen Typology Approach was used to identify the regencies/cities with fast growth and the relatively lagging regencies/cities of South Sumatra Province. The study results show that government spending on public services and health has a positive and significant effect on economic growth. Meanwhile, the government spending on housing and public facilities has a positive and insignificant effect. In contrast, the government spending on education has a negative and significant impact on economic growth. This study recommends local governments increase the allocation of regional expenditure to sectors that lead to economic growth, especially in newly created regions. [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]

Government size, corruption, and tax policy can influence allocation towards necessity or opportunity-driven entrepreneurship. Using a comparative multi-source sample across 52 countries during 2005–2015, we apply a mixed-process estimation of the simultaneously unrelated system of equations and unpack these heterogeneous and complex effects. Interestingly, our results show that the influence of tax policy and corruption on necessity and opportunity entrepreneurship depends on government size. Our results hold for numerous robustness analyses. Plain English summary: Institutions matter for the choice of opportunity and necessity-driven entrepreneurship. Government size, the level of corruption, and tax policy directly affect entrepreneurs' motivation and incentives. We study 52 countries during 2005–2015 to find out to what extent tax rate, corruption, and a range of government expenditure change the allocation of necessity and opportunity entrepreneurship. Our main implications are for (1) Research: Formal and informal institutions need to be considered when studying entrepreneurship allocation, particularly in an emerging and developing country context. Results suggest that the impact of the same institutional settings and informal institutions such as corruption on necessity and opportunity entrepreneurship is not uniform in size and scope and have different magnitude. The effect of government expenditure on necessity and opportunity entrepreneurship is not ubiquitous. (2) Management: The broader institutional context affects allocation of entrepreneurship, and potential entrepreneurs can consider how corruption in particular can affect them. (3) Policy: Policymakerscan measure the extent to which opportunity and necessity entrepreneurship are likely to change, when they make changes to tax policy, resources for public spending, and take anti-corruption measures. [ABSTRACT FROM AUTHOR]

Purpose: This study is aimed at testing the validity of the BARS theory and determining the threshold level at which excessive government expenditure hampers growth. The data from 10 African emerging economies from 1988 to 2019 were used. Design/methodology/approach: The methodology comprises several different stages. In the first stage, an Lagrange Multiplier (LM) type test was employed to find the appropriate transition variable among all the candidate variables to assess the linearity between government expenditure and economic growth and to find the sequence for selecting the order m of the transition function. The linearity test helped to identify the nature of the relationships between government expenditure and economic growth. In the second stage, the model evaluation was tested using the wild cluster bootstrap-Lagrange Multiplier (WCL-LM) test to assess appropriateness of the model. Thirdly, the Panel smooth transition regression (PSTR) model with one regime was estimated to test the validity of the BARS curve. Findings: The results revealed evidence of nonlinear effects between government expenditure and economic growth, where the size of the government spending was found to be a 27.84% share of GDP, above which government expenditure caused growth to decline in African emerging economies. The findings combined into an inverted U-shape relationship, in line with the BARS theory. Originality/value: This study proposes that policy-makers ought to formulate prudent fiscal policies that encourage expenditure, which would improve growth for selected countries as their current level of spending is below the threshold. This might be done through: (1) a suitable investment portfolio and (2) spending more on infrastructure. [ABSTRACT FROM AUTHOR]

The role of government size and digitization in the process of environmental quality is a matter of considerable debate in the field of environmental economics. BRICS economies have suffered from environmental pollution. This paper scrutinizes that how CO2 emissions respond to government size and digitization in BRICS economies. Empirical estimates of the ARDL approach show that government size has a positive impact on CO2 in Brazil, India, and China, while negative impact on CO2 in Russia in the long run. The long-run estimates reveal a negative and significant effect of digitization on CO2 in Brazil, India, and China. Education and e-learning activities have a favorable and crucial role played in environmental quality in Brazil, India, and China. Based on these findings, BRICS authorities should improve the efficiency of government expenditures and invest more in digitization to improve the quality of the environment. [ABSTRACT FROM AUTHOR]

This paper estimates a panel model in which the relationship between trade and government size is determined by countries' per capita GDP. The panel model covers 126 countries during the 1980–2018 period. Estimates of the model show that the correlation between trade and government size is decreasing in the level of countries' per capita GDP. For high-income countries with a per capita GDP above $12000US, the association between trade and government size is negative. For low-income countries with a per capita GDP below $1000US, the relationship between trade and government size is positive. In the year 2018, the average country had a per capita GDP of about $14228US. For this country, the estimated coefficients suggest that a 1% increase in trade had a predicted association with the long-run level of the size of government of over 0.17%. The paper also presents estimates suggesting that the relationship between trade and the composition of government spending differs depending on countries' incomes. [ABSTRACT FROM AUTHOR]

Copyright of Erciyes Akademi is the property of Erciyes Universitesi Sosyal Bilimler Dergisi and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper examines the mediating effect of democracy in explaining the relationship between decentralization and government size for the period 1970–2013. We proxy decentralization by fiscal decentralization, use total spending as our primary measure of government size and adopt the V‐Dem high‐level democracy indices as measures of democracy. Our main finding is that the relationship between fiscal decentralization and government spending differs under different types of democracy. From the interaction term, the negative effect of fiscal decentralization diminishes as the democracy level gets higher, particularly for participatory democracy irrespective of whether government size is measured by spending‐to‐GDP or employment. [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]

Copyright of Journal of Financial Politic & Economic Reviews / Finans Politik & Ekonomik Yorumlar is the property of Journal of Financial Politic & Economic Reviews / Finans Politik & Ekomomik Yorumlar and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Using the between-sector variation in income as a new measure of economic uncertainty, this article proposes simple models and supportive empirical evidence for the simultaneous relationship between economic uncertainty and government size in the open economy setting. Main empirical findings are that (i) a larger government reduces economic uncertainty, and, at the same time, (ii) an economy facing higher uncertainty has a larger government. However, (iii) the government tends to resort to redistributive policies to reduce the uncertainty, while (iv) government direct spending is also an effective option for the purpose. The study also finds that (v) the new cross-sectional measure of economic uncertainty tends to rise when a country becomes more open to international trade. Our results suggest that there is some trade-off between economic stability and a small government. [ABSTRACT FROM AUTHOR]

Copyright of Quarterly Journal of Economic Growth & Development Research is the property of Payame Noor University and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The Abrams curve shows the relationship between public expenditures and unemployment in a country. In the economy where this curve is valid, the increase in public expenditures causes the unemployment rate to increase. This study tests the validity of the Abrams curve for Turkey over the period 1980-2018. The stationarity of the variables is examined by the Fourier KPSS unit root test and it is understood that they are stationary at the first differences. Later, the long-term relationship between the variables is examined by the Fourier Shin cointegration test and it is determined that the variables are cointegrated. The CCR method is used to estimate long-run coefficients. According to this, one unit increase in public expenditures causes unemployment rate increase by 0.45 units. The findings from the FMOLS and DOLS estimators also support this result. Finally, the Toda-Yamamoto causality test is implemented and it is observed that there is a unidirectional causal relationship running from public expenditures to unemployment rate. The results demonstrate that the Abrams curve is valid for Turkey. [ABSTRACT FROM AUTHOR]

This paper investigates the role of model uncertainty in explaining the different findings in the literature regarding the determinants of government expenditure and its components. In particular, we systematically assess the evidentiary support for nine different theories using a novel model averaging method that allows for endogeneity. Our results suggest that the government size and its components are explained by multiple mechanisms that work simultaneously but differ in their impact and importance. Hence, policy makers should avoid relying on any particular model to make policy decisions. More precisely, for general government total expenditure we find decisive evidence for the demography theory and a strong evidence for the globalization and political institution theory. In the case of central government total expenditure, we find that income inequality and macroeconomic policy play a decisive role in addition to demography. [ABSTRACT FROM AUTHOR]

This study, assuming a balanced budget, attempts to estimate the optimal size of devolved government expenditure in 47 Kenyan counties using the panel ARDL regression and Scully (2008) model for the period 2014-2018. The estimation model examined Armey's idea of a quadratic curve that explains the level of government expenditure in an economy and the corresponding level of economic growth. The panel ARDL series analysis reveals that devolved government size is optimized when county expenditures stand at 9.7% of GCP (Gross County Product). The estimated threshold size is higher than the current size of county government in Kenya. The low level of devolved government size in counties reflects the low level of economic activities in Counties. This study therefore recommends that county governments should increase its spending budget on infrastructure, social and economic activities to 9.7% of GCP to stimulate overall county economic growth. [ABSTRACT FROM AUTHOR]

Economists typically believe that government size is an integral determinant of labor market efficiency. Therefore, it is important in practical and theoretical terms to understand the impact of government size on the unemployment rate. Recent empirical studies indicate the negative impact of government size on labor market performance. This paper explores the relationship between government size and the unemployment rate in seventeen MENA countries during the period 2003-2017 using seemingly unrelated regression models (SURs). The research found a statistically significant negative effect of government size on the labor market. It also found that total government expenditure as well as investment expenditure play a dampening role on the labor market. Causality tests indicate that there is significant two-way causal relationship between government size and the unemployment rate. But the dynamic analysis of causality indicates one-direction causality from the unemployment rate to government size. The proper policy must therefore start with addressing unemployment in MENA countries, one of whose tools is government sizing. [ABSTRACT FROM AUTHOR]

In this study, the relationship between regional unemployment rate and public expenditures in Turkey has been investigated by panel autoregressive distributed lag (ARDL) method. The panel data consists of 26 Development Regions of Turkey for the period 2004-2018. In order to analyse the long-run relationship between variables, stationary is tested by panel unit tests, then cointegration is estimated. According to the results of Panel ARDL-PMGE, 1% increase in public expenditures reduced the regional unemployment by 0,043% in the long run. On the contrary, 1% increase in public expenditures increased the regional unemployment by 0,043% in the short run. The result of this study show that Abrams curve hypothesis is valid in the short run, while the Keynesian approach is valid in the long run. [ABSTRACT FROM AUTHOR]

Research background: Although a number of studies have been conducted on the relationship between public expenditure and economic growth, it is difficult to tell with certainty whether or not an increase in public expenditure is good for economic growth. This lack of consensus on the results of the previous empirical findings makes this study of paramount importance as we take stock of the available empirical evidence from the 1980s to date. Purpose: In this paper, theoretical and empirical literature on the relationship between government expenditure and economic growth has been reviewed in detail. Focus was placed on the review of literature that assessed the impact of government spending on economic growth. Research Methodology: This study grouped studies on the impact of public expenditure on economic growth based on their results. Three groups emerged - positive impact, negative impact and no impact. This was followed by a review of each relevant study and an evaluation of which outcome was more prevalent among the existing studies on the subject. Results: The literature reviewed has shown that the impact of government spending on economic growth is not clear cut. It varies from positive to negative; with some studies even finding no impact. Although the impact of government spending on economic growth was found to be inconclusive, the scale tilts towards a positive impact. Novelty: The study provides an insight into the relationship between public expenditure and economic growth based on a comprehensive review of previous empirical evidence across various countries since the 1980s. [ABSTRACT FROM AUTHOR]

We assess how "big" government should reasonably be in a number of advanced countries. First, we will link the recent findings of Data Envelope Analysis on efficient public expenditure with the question of the size of the government. Second, we report descriptive analysis of various government performance indicators in relation to public expenditure to provide indications of overall "optimal" spending across spending categories. In principle, the highest savings potential is in the biggest expenditure categories, public consumption and social expenditure. [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]

Purpose The purpose of this paper is to assess the responses of different categories of government spending to changes in economic activity. In other words, the authors empirically revisit the validation of the Wagner's law in a sample of 61 advanced and emerging market economies between 1995 and 2015.Design/methodology/approach The authors do so via panel data instrumental variables and time-series SUR approaches.Findings Evidence from panel data analyses show that the Wagner's law seems more prevalent in advanced economies and when countries are growing above potential. However, such result depends on the government spending category under scrutiny and the functional form used. Country-specific analysis revealed relatively more cases satisfying Wagner's proposition within the emerging markets sample. The authors also found evidence of counter-cyclicality in several spending items. All in all, the Wagner's regularity seems more the exception than the norm.Originality/value While in the literature on the size of the public sector with respect to a country's level of economic development has received much attention, the authors make several novel contributions: since some economists criticized Wagner's law because of ambiguity of the measurement of government expenditure (Musgrave, 1969), instead of looking at aggregate public expenditures, the authors go much more granular into the different functions of government (to this end, the authors use the Classification of Functions of the Government nomenclature). The authors check the validity of the Law via an instrumental variable approach in a panel setting; after that, the authors take into account the phase of the business cycle using a new filtering technique to compute potential GDP (output gap); then, the authors cross-check the baseline results by considering alternative functional form specifications of the Law; and finally, the authors look at individual countries one at the time via SUR analysis. [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]

Copyright of Share: Journal of Islamic Economics & Finance / Jurnal Ekonomi dan Keuangan Islam is the property of Share Jurnal Ekonomi dan Keuangan Islam and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

What is the effect of legislature size on public spending? An answer to this question is provided by Weingast et al. (J Polit Econ 89(4):642-664, 1981), whose 'law of 1/ n' posits that an increase in the number of elected representatives always leads to an increase in public spending. Because elected politicians regard the tax base as a common pool from which they can finance specific projects for their constituencies, and these specific constituencies internalize the full benefits of the projects, but only bear a fraction of the costs (projects are financed from the common tax base), fiscal inefficiency will increase with the number of representatives. In this paper, I test the validity of the 'law of 1/ n' using a dataset of 9325 German municipalities between 2008 and 2010. Through the application of a regression discontinuity design, many of the methodological pitfalls of previous studies can be avoided and a valid estimation of the causal effect of legislature size on public spending for German municipalities can be determined. The results do not corroborate the positive findings of previous studies, which generally supported the implications of the 'law of 1/ n'. For the years 2008-2010, I find a negative effect of legislature size on public spending in German municipal councils. [ABSTRACT FROM AUTHOR]

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]

Countries with different levels of state capacity have access to different sets of policies. In particular, countries with strong state capabilities are able to draw from a broader menu of policies than countries with lower capabilities. We apply and test this insight to the case of exposure to trade-related risk. So far, most of the literature has considered that only one type of policy-the one that increases government size-can help to overcome the challenge imposed by openness. However, there are a number of policies that can mitigate trade-induced risks, many of which do not have the necessary implication of increasing public spending. Yet, many such policies require governmental capabilities not available to any country. For that reason, while the choice of a particular policy within a menu depends on political conditions, the relationship between openness and the size of government might be mediated by the capabilities of states. This paper provides reduced form evidence confirming that the empirical relationship between openness and government size is conditional on state capabilities. Therefore, public policies cannot be assessed independently of the capacity of the State that would have to implement them. [ABSTRACT FROM AUTHOR]

Statistical measurement of government has become, along with the growing extent of government interventionism, one of the main challenges for statisticians. Higgs has dealt with some aspects of how the size of government is commonly expressed (Higgs, 1991; Higgs, 2015). Aim of this comment is to add other relevant facts of methodological nature leading to the underestimation of government in statistics. We consider this issue essential even though rather ignored in the mainstream literature. As it is illustrated in the text, the size of government is apt to be underestimated in official statistics due to the immeasurability of number of interventions, lacking information and the inappropriate treatment of market mechanism suffering from lack of recognition in the relevant studies. [ABSTRACT FROM AUTHOR]

Since the late 1970s, the received wisdom has been that government size (measured as the ratio of total government expenditure to gross domestic product ( GDP) or government consumption to GDP) is detrimental to economic growth. We conduct a hierarchical meta-regression analysis of 799 effect-size estimates reported in 87 primary studies to verify if this assertion is supported by existing evidence. Our findings indicate that the conventional prior belief is supported by evidence mainly from developed countries but not from less developed countries. We argue that the negative relationship between government size and economic growth in developed countries may reflect endogeneity bias. [ABSTRACT FROM AUTHOR]

This paper reviews the empirical literature concerning the impact of economic integration on the size and the composition of the public budget. From a theoretical perspective, a pessimistic view highlights the threat that economic integration constitutes to the action of the public sector. An optimistic view, instead, emphasizes the beneficial effects of integration in stimulating efficiency – enhancing public policies. Despite some well-established theoretical results, the empirical evidence on this topic is rather controversial. Some studies support the hypothesis that taxes and public spending may increase in order to compensate losers for the risks of a more open economic environment. Other studies support the opposite idea, that the public sector retrenches when having to face increasing mobility of the production factors. Yet, comparability of the wide empirical evidence on the topic is not straightforward and empirical regularities are hard to find.

We revisit the claim that ethnic heterogeneity—the degree to which different ethnic groups make up the population—reduces local government spending on various public goods. Our analysis suggests that heterogeneity does not necessarily reduce local public spending due to two factors: (1) the low price elasticity of demand for local public goods and (2) the substitution between public goods. Using data from American cities and school districts from 2000 to 2010, we find that ethnic heterogeneity has offsetting positive and negative effects on various types of local government spending. Our findings imply that local governments respond to an increase in ethnic heterogeneity by rebalancing local public spending—for instance, adopting a policy that reallocates resources from roads to police and fire protection. [ABSTRACT FROM AUTHOR]

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]

This paper uses Swedish and Finnish municipal data to investigate the effect of changes in voter turnout on the tax rate, public spending and vote-shares. A reform in Sweden in 1970, which overall lowered the cost of voting, is applied as an instrument for voter turnout in local elections. The reform increased voter turnout in Sweden. The higher voter turnout resulted in higher municipal taxes and greater per capita local public spending. There are also indications that higher turnout decreased the vote share for right-wing parties. I use an individual survey data set to conclude that it was in particular low income earners that began to vote to a greater extent after the reform. [ABSTRACT FROM AUTHOR]

Recently, a wide and empirically backed consensus has emerged arguing that direct democratic control over government's spending decisions through initiatives and referendums constrains government size. This paper extends the discussion to German direct democracy reforms of the mid-1990s, which granted voters rights to launch initiatives on local issues, but neither the right nor the responsibility of voting on the implied costs of these initiatives. An analysis of around 2300 voter initiatives in the population of around 13,000 German municipalities from 2002 to 2009 demonstrates that in this sample-and in contrast to most of the Swiss and US evidence-direct democracy causes an expansion of local government size on average by around 8 % in annual per capita expenditure and revenue per initiative (on economic projects). This quite substantial increase in government size is financed by an increase in local taxes. [ABSTRACT FROM AUTHOR]

In our 2011 survey of the literature in the Journal of Economic Surveys on the effect of government size on economic growth in wealthy countries we find a relatively consistent pattern: An increase in government size by 10 percentage points is associated with a 0.5-1 percentage point lower annual growth rate. This conclusion is questioned by Colombier. In this rejoinder we present a rebuttal of Colombier's argument based on a detailed scrutiny of his own statistical evidence and regression results. Furthermore, we note that several new papers that have appeared since our original paper was published give support to our main conclusion. [ABSTRACT FROM AUTHOR]

This paper investigates the impact of constitutional rights on the level of public expenditure in a large sample of countries. To do so, we construct a panel of 73 countries from 1960 to 2011. We first investigate factors that drive constitutional changes regarding constitutional rights. To address potential endogeneity concerns in the choice of constitutional rules, we rely on an instrumental variable within estimation (country and time fixed effects) to estimate the impact of constitutional rights on government size. We find that larger governments tend to inscribe fewer rights in their constitutions, but we do not detect any impact of constitutional rights on the government size. [ABSTRACT FROM AUTHOR]

This paper examines the effect of the elasticity of substitution between public and private inputs on the optimal fiscal policy, long-run growth and welfare. To this end, we consider an endogenous growth model with productive public spending. If the baseline government size is suboptimally low (high), the higher the elasticity of substitution the higher (lower) are the optimal government size and, in the presence of congestion, the optimal income tax. In any case, the higher the elasticity of substitution the higher are the optimal long-run growth rate and welfare. [ABSTRACT FROM AUTHOR]

In contrast to the commonly held view, Bergh and Henrekson (2011) conclude that a consensus has almost been reached on the thesis that government size is negatively correlated with economic growth in developed countries. They underpin this by claiming that the only study in the survey to deviate from this consensus view, i.e. Colombier (2009), was rebutted by Bergh and Öhrn (2011). This comment shows that the claim by Bergh and Henrekson (2011) cannot be upheld because the analysis by Bergh and Öhrn (2011) is based on a flawed dataset. The re-estimation of Colombier's (2009) regressions with time-fixed effect does not reject his main findings. Moreover, it is demonstrated that recent empirical evidence on the growth impact of government size in rich countries is not as unanimous as the survey by Bergh and Henrekson (2011) suggests. Thus, the claim that a consensus view has been reached is premature. [ABSTRACT FROM AUTHOR]