Measuring the Strength of the Theories of Government Size
Alex Lenkoski and
University of Cyprus Working Papers in Economics from University of Cyprus Department of Economics
Existing theoretical and empirical evidence on the determinants of government expenditure is inconclusive. We posit that the main cause of this problem is theory uncertainty, which arises due to the fact that the different theories imply different mutually compatible and interrelated mechanisms. This paper proposes a novel model averaging method to perform model averaging in linear regression systems that allows for endogeneity. Using data for more than 90 countries we assess the evidentiary support for nine different theories. Our results suggest that the government size and its components are explained by multiple mechanisms that work simultaneously but differ in their impact and importance. In particular, for general government total expenditure we find decisive evidence for the demography theory and a strong evidence for the globalization and political institution theory. In the case of central government total expenditure, we find that income inequality and macroeconomic policy play a decisive role in addition to demography.
Keywords: Bayesian Model Averaging; Conditional Bayes Factors; Endogeneity; Government Expenditure; Gibbs Sampling (search for similar items in EconPapers)
JEL-codes: C4 C11 C59 H10 H50 (search for similar items in EconPapers)
Pages: 67 pages
New Economics Papers: this item is included in nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ucy:cypeua:11-2017
Access Statistics for this paper
More papers in University of Cyprus Working Papers in Economics from University of Cyprus Department of Economics
Bibliographic data for series maintained by ().