Government size and economic growth: some evidence from a market price approach

Erkki Koskela and Matti Virén

No 12/1990, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: This paper presents a simple model of aggregate demand in current market prices, in which public sector employment affects aggregate (and private) demand via the total output, the lump-sum taxes and the valuation of public sector production. Whlle the last effect is positive for aggregate demand, the other two effects are ambiguous a priori so that the total effect remains indeterminate. On the other hand, the relationshi'p between public sector employment and private output (and demand) is quite likely sensitive to and might depend inversely on the size of the public sector. Empirical results using data from 19 OECD countries over the period 1960 - 1987 indicate that there is practically no within-country relationship between public sector employment and private sector output over time, while there seems to be some, though weak, evidence in favour of the hypothesis that the effect of the public sector employment on private sector output depends inversely on the size of the publie sector across countries.

Date: 1990
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/211587/1/bof-rdp1990-012.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp1990_012

Access Statistics for this paper

More papers in Bank of Finland Research Discussion Papers from Bank of Finland Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().