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Burying the Bumblebee Once and for All:

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High levels of social trust has been linked to both public sector size and long term economic growth, thereby helping to explain how some countries are able to combine high taxes and relatively high levels of economic growth. This paper examines if social trust as a background factor also insulates countries against negative effects of public sector size on growth, as government size and growth are found to be negatively associated in several recent studies. We note that the effect is theoretically ambiguous. In panel data from 66 countries across 40 years, we find little robust evidence of insulating effects. Instead we find robust evidence that high trust aggravates the crowding out effects of public sector size on private investments.

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  • Bergh, Andreas & Bjørnskov, Christian, 2016. "Burying the Bumblebee Once and for All:," Working Paper Series 1119, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:1119
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    Cited by:

    1. Urs Steiner Brandt & Gert Tinggaard Svendsen, 2019. "How robust is the welfare state when facing open borders? An evolutionary game-theoretic model," Public Choice, Springer, vol. 178(1), pages 179-195, January.

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    More about this item

    Keywords

    Tust; Economic growth; Government consumption;
    All these keywords.

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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