Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/22523
Authors: 
Rehme, Günther
Year of Publication: 
2004
Series/Report no.: 
Darmstadt Discussion Papers in Economics 140
Abstract: 
This paper analyzes the link between growth and public policy when the latter depends on economically important fundamentals. When policy is endogenous the measured effects of policy on growth will generally be biased. Using a widely quoted theoretical model, the signs of the biases are derived. It is shown that the usually reported effects on growth of tax rate variables related to GDP, the ratio of public investment to total investment and the ratio of redistributive transfers to GDP are generally biased downwards. Based on these signed biases the paper discusses some empirical results that seem puzzling from a theoretical viewpoint.
Subjects: 
Growth
Public Policy
Cross-Sectional Models
JEL: 
O4
C2
Document Type: 
Working Paper

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