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Title:Growth effects of government expenditure and taxation in rich countries PDF Logo
Authors:Fölster, Stefan
Henrekson, Magnus
Issue Date:2000
Series/Report no.:SSE/EFI Working Paper Series in Economics and Finance 391
Abstract:A number of cross-country comparisons do not find a robust negative relationship between government size and economic growth. In part this may reflect the prediction in economic theory that a negative relationship should exist primarily for rich countries with large public sectors. In this paper an econometric panel study is conducted on a sample of rich countries covering the 1970-95 period. Extended extreme bounds analyses are reported based on a regression model that tackles a number of econometric issues. Our general finding is that the more econometric problems are addressed, the more robust the relationship between government size and economic growth appears. Our most complete specifications are robust even according to the stringent extreme bounds criterion.
Subjects:Economic growth
Extreme bounds analysis
Fiscal Policy
Government expenditure
Public sector
Taxation
Cross-country regressions
Panel regressions
Robustness test
JEL:E62
H20
H50
O23
O40
Document Type:Working Paper
Appears in Collections:SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics

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