The Optimal Government Size: Further International Evidence on the Productivity of Government Services

Georgios Karras

Economic Inquiry, 1996, vol. 34, issue 2, 193-203

Abstract: This paper estimates the optimal government size for several sets of economies by investigating the role of public services in the production process. The author assumes government services are optimally provided when their marginal product equals unity (the 'Barro rule'). The empirical results suggest that government services are significantly productive; they are over provided in Africa, under provided in Asia, and optimally provided everywhere else; the optimal government size is 23 percent for the average country but ranges from 14 percent for the average OECD country to 33 percent in South America; and the marginal productivity of government services is negatively related to government size. Copyright 1996 by Oxford University Press.

Date: 1996
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