Burying the Bumblebee Once and for All

Andreas Bergh and Christian Bjørnskov

No 1119, Working Paper Series from Research Institute of Industrial Economics

Abstract: 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.

Keywords: Tust; Economic growth; Government consumption (search for similar items in EconPapers)
JEL-codes: H10 O11 P16 Z10 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2016-03-21
New Economics Papers: this item is included in nep-evo, nep-fdg, nep-gro and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:1119

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