Government size, productivity, and economic growth: The post-war experience

Edgar Peden and Michael Bradley

Public Choice, 1989, vol. 61, issue 3, 229-245

Abstract: A substantial portion of the slowdown in productivity and economic growth in the seventies and eighties cannot be ascribed to traditional factors. We have found one potential additional source: the dramatic growth in the scale of government. Employing a theoretical model of output growth, we derive an equation which controls for cyclical influences and which permits distinguishing the effects of government growth on the economic base from the effects on the economic growth rate. We find that increases in the scale of government lead to statistically significant reductions in both the economic base and the economic growth rate. In addition, we find that most of this government-induced retardation of economic activity arises from reductions in productivity rather that reductions in the employment of factors. Copyright Kluwer Academic Publishers 1989

Date: 1989
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DOI: 10.1007/BF00123886

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