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Growth, Welfare, and the Size of Government

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  • Knoop, Todd A

Abstract

Using an endogenous growth model in which government purchases directly affect aggregate productivity and utility, fiscal policy experiments conducted here indicate that the macroeconomic effects of changes in fiscal policy are at least as sensitive to the mix of spending cuts as they are to the mix of tax cuts. In fact, reducing the size of the government actually reduces growth and welfare if reductions in government expenditures are heavily weighted towards reductions in public capital or if the proceeds are not used to reduce capital taxation. In addition, across-the-board spending cuts are not likely to significantly improve growth and welfare. Copyright 1999 by Oxford University Press.

Suggested Citation

  • Knoop, Todd A, 1999. "Growth, Welfare, and the Size of Government," Economic Inquiry, Western Economic Association International, vol. 37(1), pages 103-119, January.
    • Handle: RePEc:oup:ecinqu:v:37:y:1999:i:1:p:103-19
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    Cited by:

    1. Edward Nketiah-Amponsah & Bernard Sarpong, 2019. "Effect of Infrastructure and Foreign Direct Investment on Economic Growth in Sub-Saharan Africa," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 11(3), pages 183-201, September.
    2. Yobouet Thierry Bienvenu Gnangoin & Akadje Jean-Roland Edjoukou & Diby François Kassi, 2019. "Public Spending and Economic Growth in Latin America Countries: A Panel Fixed Effect Analysis," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 12(1), pages 50-63, April.
    3. Ding, Chengri & Niu, Yi & Lichtenberg, Erik, 2014. "Spending preferences of local officials with off-budget land revenues of Chinese cities," China Economic Review, Elsevier, vol. 31(C), pages 265-276.
    4. Buket Altinoz & Nicholas Apergis & Alper Aslan, 2021. "Energy Consumption, Carbon Dioxide Emissions and Economic Growth - Fresh Evidence From Panel Quantile Regressions," Energy RESEARCH LETTERS, Asia-Pacific Applied Economics Association, vol. 1(1), pages 1-4.
    5. Prof. Nnamocha, P. N. & Anyanwu, Austin C. (PhD), 2022. "Domestic Investment and Economic Growth in Nigeria, 1980-2020," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 9(8), pages 122-131, August.
    6. Apata Temidayo Gabriel, 2019. "Public spending mechanisms and gross domestic product (GDP) growth in the agricultural sector (1970–2016): Lessons for Nigeria from agricultural policy progressions in China," Bulletin of Geography. Socio-economic Series, Sciendo, vol. 44(44), pages 57-72, June.
    7. Dadson Awunyo-Vitor & Ruby Adjoa Sackey, 2018. "Agricultural sector foreign direct investment and economic growth in Ghana," Journal of Innovation and Entrepreneurship, Springer, vol. 7(1), pages 1-15, December.
    8. John Kibara Manyeki & Balázs Kotosz, 2017. "Empirical Analysis of the Wagner Hypothesis of Government Expenditure Growth in Kenya: ARDL Modelling Approach," Theory Methodology Practice (TMP), Faculty of Economics, University of Miskolc, vol. 13(02), pages 45-57.
    9. Blerta Aliu, 2014. "Legal and Practical Aspects of Bankruptcy Proceedings in Albania and Their Role in the Protection of Stakeholders," European Journal of Social Sciences Education and Research Articles, Revistia Research and Publishing, vol. 1, September.
    10. Bernard Sarpong & Edward Nketiah-Amponsah & Nkechi S. Owoo, 2020. "Health and Economic Growth Nexus: Evidence from Selected Sub-Saharan African (SSA) Countries," Global Business Review, International Management Institute, vol. 21(2), pages 328-347, April.

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