The Size of Government and U.S.-European Differences in Economic Performance

53 Pages Posted: 28 Apr 2009

See all articles by Norikazu Tawara

Norikazu Tawara

University of Chicago

Gerwin Bell

International Monetary Fund (IMF)

Date Written: April 2009


An influential strand of recent research has claimed that large governments in European countries explain their weaker long-term economic performance compared to the U.S. On the other hand, despite these alleged costs, large governments have been popular with electorates. This paper seeks to shed light on this apparent inconsistency; it confirms an adverse effect of taxes on labor supply, but also finds evidence of efficiency-increasing government intervention. However, and especially in the core "Rhineland-model" European countries, actual government policies often depart from such efficient interventions, pointing to the possibility that voters prefer redistribution even at the cost of allocational efficiency.

Keywords: Working Papers

Suggested Citation

Tawara, Norikazu and Bell, Gerwin, The Size of Government and U.S.-European Differences in Economic Performance (April 2009). IMF Working Papers, Vol. , pp. 1-51, 2009. Available at SSRN:

Norikazu Tawara (Contact Author)

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Gerwin Bell

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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