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Government and growth

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  • Colombier, Carsten

Abstract

In contrast to most empirical growth studies, this study applies a robust estimator, which accounts for outliers, non-Gaussian distributions and a lack of quality in datasets like those for growth empirics. According to the empirical analysis, the relationship between government activities and economic growth is generally weak. Positive correlations with economic growth have been verified, however, for water and sewer systems and transport and communication infrastructures, as well as public research and development expenditures. The growth effects of transport and communication infrastructures in particular appear to be stable. Positive correlations have been identified for public educational expenses only at central government level. However, it must be stated that the relation between education and economic performance is complex. In contrast, no significant growth effects were found with respect to government revenues. As a consequence, the predictions of endogenous growth theory cannot be confirmed for the revenue side. Furthermore, no significant relation between government size and economic growth was confirmed. This suggests that the question of optimal government size is empirically not solvable. Thus, empirical analyses should be focused on the growth effects of single government activities.

Suggested Citation

  • Colombier, Carsten, 2004. "Government and growth," MPRA Paper 104938, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:104938
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    References listed on IDEAS

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    More about this item

    Keywords

    new growth empirics; government expenditures; modified maximum likelihood estimator; government size; fiscal policy; growth;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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