Tracing the Link between Government Size and Growth: The Role of Public Sector Quality

Daniel Oto-Peralías () and Diego Romero-Avila ()
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Daniel Oto-Peralías: Pablo de Olavide University
Diego Romero-Avila: Pablo de Olavide University

No 2012.3, Working Papers from International Network for Economic Research - INFER

Abstract: This paper shows evidence of strong heterogeneity in the relationship between government size and growth, depending on the quality of public sector institutions. Focusing on a wide sample of developed and developing countries over the period 1981-2005, we find that government size reduces growth when bureaucracy quality is low, whereas no significant effect is observed for sufficiently high levels of bureaucracy quality. The results hold both in cross-section and panel data analyses and are robust to a large number of robustness checks. These findings have important implications for assessing the role of government size in economic growth.

Keywords: Government Size; Growth; Institutions; Public Sector Quality (search for similar items in EconPapers)
Pages: 40 pages
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:inf:wpaper:2012.3

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