Legitimacy and the Cost of Government

Niclas Berggren, Christian Bjørnskov and David Lipka ()
Additional contact information
David Lipka: School of International Relations and Diplomacy, Postal: Anglo American University, Czech Republic

No 1045, Working Paper Series from Research Institute of Industrial Economics

Abstract: While previous research documents a negative relationship between government size and economic growth, suggesting an economic cost of big government, a given government size generally affects growth differently in different countries. As a possible explanation of this differential effect, we explore whether perceived government legitimacy (measured by satisfaction with the way democracy works) influences how a certain government size affects growth. On the positive side, a legitimate government may “get away” with being big since legitimacy can affect people’s behavioral response to, and therefore the economic growth cost of, taxation and government expenditures. On the negative side, legitimacy may make voters less prone to acquire information, which in turn facilitates interest-group oriented or populist policies that harm growth. A panel-data analysis of up to 30 developed countries, in which two different measures of the size of government are interacted with government legitimacy, reveals that legitimacy exacerbates a negative growth effect of government size in the long run. This could be interpreted as governments taking advantage of legitimacy in order to secure short-term support at a long-term cost to the economy.

Keywords: Legitimacy; Economic growth; Size of government; Confidence; Trust (search for similar items in EconPapers)
JEL-codes: E62 H11 H20 O43 Z13 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2014-10-30
New Economics Papers: this item is included in nep-gro, nep-mac, nep-pbe, nep-pol and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published as Berggren, Niclas, Christian Bjørnskov and David Lipka, 'Legitimacy and the Cost of Government' in Public Choice, 2015, pages 307-328.

Downloads: (external link)
https://www.ifn.se/wfiles/wp/wp1045.pdf (application/pdf)

Related works:
Journal Article: Legitimacy and the cost of government (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:1045

Access Statistics for this paper

More papers in Working Paper Series from Research Institute of Industrial Economics Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Elisabeth Gustafsson ().