Government Size, Composition, Volatility and Economic Growth
45 Pages Posted: 27 Jan 2008
Date Written: January 2008
This paper analyses the effects in terms of size and volatility of government revenue and spending on growth in OECD and EU countries. The results of the paper suggest that both variables are detrimental to growth. In particular, looking more closely at the effect of each component of government revenue and spending, the results point out that i) indirect taxes (size and volatility); ii) social contributions (size and volatility); iii) government consumption (size and volatility); iv) subsidies (size); and v) government investment (volatility) have a sizeable, negative and statistically significant effect on growth.
Keywords: fiscal policy, government size, fiscal volatility, economic growth
JEL Classification: E62, H50, O40
Suggested Citation: Suggested Citation