Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153358
Authors: 
Furceri, Davide
Poplawski Ribeiro, Marcos
Year of Publication: 
2008
Series/Report no.: 
ECB Working Paper 924
Abstract: 
This paper provides empirical evidence showing that smaller countries tend to have more volatile government spending for a sample of 160 countries from 1960 to 2000. We argue that the larger size of a country decreases the volatility of government spending because it acts as an insurance against idiosyncratic shocks, and it leads to increasing returns to scale due to the higher ability of the government to spread its cost of financing over a larger pool of taxpayers. The results are robust to different time and country samples, different econometric techniques and to several sets of control variables. The analysis also evinces that country size is negatively related to the discretionary part of government spending and to the volatilities of most of the government spending items.
Subjects: 
Country Size
Fiscal Policy
fiscal volatility
government size
H10
JEL: E62
JEL: 
E62
H10
Document Type: 
Working Paper

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