Estimating the Impact of Government Consumption on Growth: Growth Accounting and Endogenous Growth Models

Steve Dowrick

Empirical Economics, 1996, vol. 21, issue 1, 163-86

Abstract: Panel data is analyzed on government consumption and C-DP growth in 116 countries, 1950-90. The purported positive impact of government growth on GDP growth is due to simultaneity bias. The negative cross-national correlation between government size and economic growth reflects in part an equilibrium relationship. Growth is a non-monotonic function of government size (measured at current domestic paces). Growth rates are increasing in government consumption expenditures up to a level around 12 percent of GDP.

Date: 1996
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