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Are government transfers harmful to economic growth? A meta-analysis

S. Awaworyi Churchill and Siew Ling Yew ()

Economic Modelling, 2017, vol. 64, issue C, 270-287

Abstract: A common perception is that government transfers are harmful to economic growth. However, existing empirical evidence on this point is mixed. Potential reasons for these conflicting results include differences in the level of economic development of the countries studied, different estimation methods and different measures of government transfers. By conducting a meta-analysis of 149 estimates reported in 23 studies, we sought to understand if – and if so, to what extent – government transfers are harmful to economic growth, as well as how important the abovementioned reasons are in explaining different findings in the literature. We found that government transfers are more detrimental to economic growth in developed countries compared to less-developed countries because such transfers can have a non-monotonic effect on growth. When government transfers are substantial, as they are in developed countries, they tend to reduce growth. We also found that the growth effects of government transfers are sensitive to the measurement of the transfers, i.e., studies that use unemployment benefits instead of social security tend to report a stronger negative growth effect.

Keywords: Transfers; Welfare policy; Social security; Taxes; Economic growth (search for similar items in EconPapers)
JEL-codes: I38 H53 H55 O47 E62 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1016/j.econmod.2017.03.030

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