Federal, State, and Local Governments: Evaluating Their Separate Roles in US Growth

28 Pages Posted: 31 Jan 2009

See all articles by Matthew John Higgins

Matthew John Higgins

University of Utah - Department of Entrepreneurship & Strategy; National Bureau of Economic Research (NBER); Max Planck Institute for Innovation and Competition

Andrew T. Young

Texas Tech University - Rawls College of Business

Daniel Levy

Bar-Ilan University - Department of Economics; Emory University - Department of Economics; Rimini Center for Economic Analysis

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Abstract

We use US county level data (3,058 observations) from 1970 to 1998 to explore the relationship between economic growth and the extent of government employment at three levels: Federal, state and local. We find that increases in federal, state and local government employments are all negatively associated with economic growth. We find no evidence that government is more efficient at lower levels. While we cannot separate out the productive and redistributive services of government, we document that the county-level income distribution became slightly more unequal from 1970 to 1998. For those who justify government activities in terms of equity concerns - perhaps even trading off economic growth for equity - the burden falls on them to show that the income distribution would have widened more in the absence of government activities. We conclude that a release of government-employed labor inputs to the private sector would be growth-enhancing.

Keywords: Economic Growth, Federal Government, State Government, Local Government, County-Level Data, Metro and Non-Metro Counties, Income Distribution, Equity

JEL Classification: O40, O11, O18, O51, R11, H50, H70

Suggested Citation

Higgins, Matthew John and Young, Andrew T. and Levy, Daniel, Federal, State, and Local Governments: Evaluating Their Separate Roles in US Growth. Public Choice, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1335877

Matthew John Higgins

University of Utah - Department of Entrepreneurship & Strategy ( email )

1655 East Campus Center Dr.
Salt Lake City, UT 84112
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Max Planck Institute for Innovation and Competition ( email )

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Munich, Bayern 80539
Germany

Andrew T. Young

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

Daniel Levy (Contact Author)

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 5290002
Israel
+972 3 531-8345 (Phone)
+972 3 738-4034 (Fax)

HOME PAGE: http://econ.biu.ac.il/en/levy

Emory University - Department of Economics ( email )

1602 Fishburne Drive, Suite 306
Rich Building
Atlanta, GA 30322-0001
United States

HOME PAGE: http://economics.emory.edu/home/people/faculty/Levydaniel.html

Rimini Center for Economic Analysis ( email )

Wilfrid Laurier University
75 University Ave W.
Waterloo, Ontario N2L3C5
Canada

HOME PAGE: http://rcea.org/

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