The Scope of Government and Its Impact on Economic Growth in OECD Countries

• Abstract

  This paper investigates the relationship between the size of government and economic growth in OECD countries in 1960-2000. The underlying idea is that government expenditures on public goods basically have a positive effect on growth, but this growth effect tends to decline or even reverse when government is overdoing, e.g. by increasing expenditures in such a way that it ultimately also provides private goods. Empirical analyses based on panel estimates for 21 OECD countries support this hypothesis: Total government expenditures as well as expenditures by type indicate a significant negative impact on economic growth (excepting transfers and public investments).

• Keywords

  Government expenditure, taxation and economic growth

• JEL classification

  H1, H2, O4

• Download

  KAP 1034