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Government size and unemployment:evidence from developing countries

Author

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  • Horst Feldmann

    (University of Bath, UK)

Abstract

Using data from 58 countries and the period 1980 to 2003, this paper analyzes how the size of government affects unemployment in developing countries. According to the regression results, a large government sector is likely to increase unemployment. A large share of government consumption in total consumption and a large share of transfers and subsidies in GDP most clearly appear to have a detrimental effect. By contrast, we do not find evidence that dominant state-owned enterprises and a large share of public investment in total investment affect unemployment, neither for bad nor for good. The results are robust to variations in specification and estimation method.

Suggested Citation

  • Horst Feldmann, 2009. "Government size and unemployment:evidence from developing countries," Journal of Developing Areas, Tennessee State University, College of Business, vol. 43(1), pages 315-330, September.
    • Handle: RePEc:jda:journl:vol.43:year:2009:issue1:pp:315-330
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    Citations

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    Cited by:

    1. Antonio Afonso & Hüseyin Sen & Ayse Kaya, 2021. "Government Size, Unemployment and Inflation Nexus in Eight Large Emerging Market Economies," Hacienda Pública Española / Review of Public Economics, IEF, vol. 235(1), pages 133-170, March.
    2. Orkun ÇELIK & Elif ERER, 2021. "The Role of Gender in the Government Expenditure and Unemployment Nexus: An Investigation at Regional Level for Turkey," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 112-128, June.
    3. Hüseyin Şen & Ayşe Kaya & Ayşegül Durucan, 2023. "New insights into the growth-maximizing size of government: evidence and implications for Turkey," Economic Change and Restructuring, Springer, vol. 56(4), pages 2243-2296, August.
    4. Altan Aldan, 2021. "The multiplier effect of public employment on formal employment in the private sector: Evidence from Turkey," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 1016-1031, May.
    5. Graafland, J.J. & Compen, B., 2012. "Economic Freedom and Life Satisfaction : A Cross Country Analysis," Discussion Paper 2012-038, Tilburg University, Center for Economic Research.
    6. Johan Graafland & Bart Compen, 2015. "Economic Freedom and Life Satisfaction: Mediation by Income per Capita and Generalized Trust," Journal of Happiness Studies, Springer, vol. 16(3), pages 789-810, June.

    More about this item

    Keywords

    public expenditure; size of government; taxation; unemployment;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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