Government size and economic growth: reassessment of the empirical validity of the negative relationship from an OECD panel(in Japanese)

Kengo Moro

ESRI Discussion paper series from Economic and Social Research Institute (ESRI)

Abstract: Although empirical studies of the impact of government size on economic performance do exist, those findings mixed, and have been questioned on a number of grounds. This paper seeks not only to find empirical evidence of the relationship between government total outlays and economic growth for OECD countries using panel data methods, but also to examine how robust these correlations are and whether the economic impact varies according to the composition of public expenditure. Our study takes into account country-specific factors, the possibilities of measurement errors, and reverse-causality problems. It also includes other independent variables that may explain economic growth. However, the negative relationship between government size and economic performance can clearly be observed. In addition, it is shown that government consumption is likely to have a larger negative impact on economic growth than do government transfers such as social security expenditures and interest payments. JEL Classification: E62; H50; O40 Key words: Government size; Public expenditures; Economic growth

Pages: 33 pages
Date: 2004-05
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