Working Paper No. 503

Growth Effects of Government Expenditure and Taxation in Rich Countries

Published: September 22, 1998, revised June 20, 2000Pages: 22Keywords: Economic Growth, Extreme Bounds Analysis, Government Expenditure, Public Sector, Taxation, Cross-Country Regressions, Panel Regressions, Robustness Test JEL-codes: E62, H20, H50, O23, O40

Growth Effects of Government Expenditure and Taxation in Rich Countries Stefan Fölster and Magnus Henrekson

 

A number of cross-country comparisons do not find a robust negative relationship between government size and economic growth. In part this may reflect the prediction in economic theory that a negative relationship should exist primarily for rich countries with large public sectors. In this paper an econometric panel study is conducted on a sample of rich countries covering the 1970–95 period. Extended extreme bounds analyses are reported based on a regression model that tackles a number of econometric issues. Our general finding is that the more econometric problems are addressed, the more robust the relationship between government size and economic growth appears. Our most complete specifications are robust even according to the stringent extreme bounds criterion.

Magnus Henrekson

Contact

Ph: +46 (0)8 665 4502
magnus.henrekson@ifn.se

The Revival of the Capitalist Welfare State

Most recent book

Omslag

In Sweden and the Revival of the Capitalist Welfare State Andreas Bergh tackles a number of controversial questions regarding Sweden’s economic and political development:

• How did Sweden become rich?

• How did Sweden become egalitarian?

• Why has Sweden since the early 1990s grown faster than the US and most EU-countries despite its high taxes and generous welfare state?

Events

Seminars organized by IFN

 

To present ongoing research informal brown-bag seminars are held on Mondays at 11:30 am. This is an opportunity for IFN researchers to test ideas and results.

Academically oriented seminars are most of the time held on Wednesdays at 10 am. At these events researchers from IFN and other institutions present their research.

In addition, IFN organizes seminars open to the public. Topics for these are derived from the IFN research.

Research Institute of Industrial Economics, Grevgatan 34 - 2 fl, Box 55665, SE-102 15 Stockholm, Sweden | Phone: +46-(0)8-665 45 00 | info@ifn.se