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The Scope of Government and its Impact on Economic Growth in OECD Countries

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  • Heitger, Bernhard

Abstract

This paper investigates the relationship between the size of government and economic growth in OECD countries in 1960?2000. The underlying idea is that government expenditures on public goods basically have a positive effect on growth, but this growth effect tends to decline or even reverse when government is overdoing, e.g. by increasing expenditures in such a way that it ultimately also provides private goods. Empirical analyses based on panel estimates for 21 OECD countries support this hypothesis: Total government expenditures as well as expenditures by type indicate a significant negative impact on economic growth (excepting transfers and public investments).

Suggested Citation

  • Heitger, Bernhard, 2001. "The Scope of Government and its Impact on Economic Growth in OECD Countries," Kiel Working Papers 1034, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1034
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    References listed on IDEAS

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    4. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    5. James Gwartney & Randal Holcombe & Robert Lawson, 1998. "The Scope of Government and the Wealth of Nations," Cato Journal, Cato Journal, Cato Institute, vol. 18(2), pages 163-190, Fall.
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    More about this item

    Keywords

    Government expenditure; taxation and economic growth;

    JEL classification:

    • H1 - Public Economics - - Structure and Scope of Government
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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