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The Effect of Government Size on Economic Growth

Author

Listed:
  • Edmund J. Sheehey

    (Agnes Scott College)

Abstract

This paper tests the hypothesis that the impact of government expenditures on growth is initially positive but becomes weaker or even negative beyond some threshold of government size or level of development. The author's cross-country regression results support this proposition in that the impact of changes in government size is positive and significant both for low income countries and for countries with a low share of government expenditures in GDP while being negative for countries with a high share for government expenditures and negative and significant for high income countries.

Suggested Citation

  • Edmund J. Sheehey, 1993. "The Effect of Government Size on Economic Growth," Eastern Economic Journal, Eastern Economic Association, vol. 19(3), pages 321-328, Summer.
    • Handle: RePEc:eej:eeconj:v:19:y:1993:i:3:p:321-328
    as

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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume19/V19N3P321_328.pdf
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    References listed on IDEAS

    as
    1. Levine, Ross & Renelt, David, 1991. "Cross-country studies of growth and policy : methodological, conceptual, and statistical problems," Policy Research Working Paper Series 608, The World Bank.
    2. Ram, Rati, 1986. "Government Size and Economic Growth: A New Framework and Some Evidencefrom Cross-Section and Time-Series Data," American Economic Review, American Economic Association, vol. 76(1), pages 191-203, March.
    3. Saunders, Peter, 1985. "Public Expenditure and Economic Performance in OECD Countries," Journal of Public Policy, Cambridge University Press, vol. 5(1), pages 1-21, February.
    4. Grossman, Philip J, 1990. "Government and Growth: Cross-sectional Evidence," Public Choice, Springer, vol. 65(3), pages 217-227, June.
    5. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
    6. International Monetary Fund, 1989. "Government Expenditure and Economic Growth: An Empirical Investigation," IMF Working Papers 1989/045, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Economic Growth; Government; Growth;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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