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Productivity in the United States and Its Relationship to Government Activity: An Analysis of 57 Years, 1929-1986

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  • Peden, Edgar A

Abstract

Under the classical supply-side paradigm of productivity growth, raising government economic above rudimentary levels integrates markets and provides useful public goods which enhance growth. Beyond some point however, increasing government activity discourages growth through tax disincentives and by rewarding dependence on government expenditures. Defining government economic activity to be government expenditures as a percentage of GNP, this study looks first at data for the period 1889-1986 and shows that the U.S. economy has experienced what is predicted by the supply-side paradigm. In addition, the study presents an econometric analysis of government's effects on productivity for the period 1929-86 using a standard neoclassical growth model. This analysis validates the classical supply-side paradigm and shows that maximum productivity growth occurs when government expenditures represent about 20 percent of GNP, far less than the 35 percent which existed in 1986. Copyright 1991 by Kluwer Academic Publishers

Suggested Citation

  • Peden, Edgar A, 1991. "Productivity in the United States and Its Relationship to Government Activity: An Analysis of 57 Years, 1929-1986," Public Choice, Springer, vol. 69(2), pages 153-173, February.
    • Handle: RePEc:kap:pubcho:v:69:y:1991:i:2:p:153-73
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    Cited by:

    1. Facchini, François & Melki, Mickaël, 2013. "Efficient government size: France in the 20th century," European Journal of Political Economy, Elsevier, vol. 31(C), pages 1-14.
    2. Ngarambé, Octavian & Goetz, Stephan J. & Debertin, David L., 1998. "Regional Economic Growth and Income Distribution: County-Level Evidence from the U.S. South," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 30(2), pages 325-337, December.
    3. Minford, Patrick & Meenagh, David & Wang, Jiang, 2007. "Growth and relative living standards - testing Barriers to Riches on post-war panel data," Cardiff Economics Working Papers E2007/12, Cardiff University, Cardiff Business School, Economics Section.
    4. Ayşegül Durucan, 2022. "Testing The Validity Of The Bars Curve For Turkey," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 67(232), pages 153-192, January –.
    5. Wanjuu Zungwe Lazarus & Hlalefang Khobai & Pierre Le Roux, 2017. "Government Size and Economic Growth in Africa and the Organization for Economic Cooperation and Development Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 628-637.
    6. François Facchini & Mickaël Melki, 2011. "Optimal Government Size and Economic Growth in France (1871-2008): An explanation by the State and Market Failures," Documents de travail du Centre d'Economie de la Sorbonne 11077, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    7. Davies, Antony, 2009. "Human development and the optimal size of government," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(2), pages 326-330, March.
    8. Mroczek Teresa & Skica Tomasz & Rodzinka Jacek, 2019. "Optimal Size of the General Government Sector from the Point of View of its Impact on the EU Economies," South East European Journal of Economics and Business, Sciendo, vol. 14(2), pages 95-105, December.
    9. Bourguignon, Francois, 2005. "The Effect of Economic Growth on Social Structures," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 27, pages 1701-1747, Elsevier.
    10. Halkos, George & Paizanos, Epameinondas, 2015. "Fiscal policy and economic performance: A review of the theoretical and empirical literature," MPRA Paper 67737, University Library of Munich, Germany.
    11. Patrick J. Caragata, 1998. "From Welfare State to Optimal Size of Government: A Paradigm Shift for Public Policy," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 5(3), pages 277-287.
    12. Mrs. Esther Perez Ruiz & Mauricio Soto, 2019. "Attaining Selected Sustainable Development Goals in Guatemala: Spending, Provision, and Financing Needs," IMF Working Papers 2019/060, International Monetary Fund.
    13. Facchini, François & Melki, Mickaël, 2013. "Efficient government size: France in the 20th century," European Journal of Political Economy, Elsevier, vol. 31(C), pages 1-14.
    14. Trofimov, Ivan D., 2020. "Health Care Spending and Economic Growth: Armey-Rahn Curve in a Panel of European Economies," MPRA Paper 106705, University Library of Munich, Germany.
    15. Hyun Park, 2010. "Fiscal Policy and Equitable Growth," Review of Development Economics, Wiley Blackwell, vol. 14(1), pages 121-140, February.
    16. Nadasi Levente, 2015. "How Does Economic Freedom Influence The Relationship Between Government Size And Convergence?," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 623-630, July.
    17. repec:vrs:joheec:v:1:y:2014:i:1:p:1-30:n:1 is not listed on IDEAS
    18. Federica Calidoni, 2004. "Aggregate and Disaggregate Analysis of the Effects of Government Expenditure on Growth," Dundee Discussion Papers in Economics 160, Economic Studies, University of Dundee.
    19. Maiga Nouhoun Oumarou & Sirpe Gnanderman, 2023. "Optimal size of public expenditure in the countries of the West African Economic and Monetary Union (WAEMU)," Economics Bulletin, AccessEcon, vol. 43(1), pages 146-160.

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