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The Size and Composition of Government Spending in Europe and Its Impact on Well-Being

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  • Hessami, Zohal

Abstract

This paper analyses whether large governments in Europe reflect efficient responses to a changing social and economic environment (‘welfare economic view’) as opposed to wasteful spending (‘public choice view’). To this end, the effect of government size on subjective well-being is estimated in a micro dataset covering twelve EU countries from 1990 to 2000. The estimations provide evidence for (i) an inversely U-shaped relationship between public sector size and well-being. (ii) The effect of government size on well-being depends on levels of corruption and decentralization as well as people’s ideological preferences and their position in the income distribution. Finally, (iii) higher levels of well-being could have been achieved by spending more on education and less on social protection.

Suggested Citation

  • Hessami, Zohal, 2010. "The Size and Composition of Government Spending in Europe and Its Impact on Well-Being," MPRA Paper 21195, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:21195
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    More about this item

    Keywords

    Life satisfaction; well-being; public spending; government size;
    All these keywords.

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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