Government Size and Automatic Stabilizers: International and Intranational Evidence
31 Pages Posted: 1 Nov 1999
Date Written: July 1999
This paper studies the role of automatic stabilizers using a sample of OECD countries and US states. We find that there is a strong and robust negative correlation between measures of government size and the volatility of output. This correlation is robust to the inclusion of a large set of controls as well as to alternative methods of detrending and estimation. The economic significance of this relationship is larger for the US states.
JEL Classification: E6, F41
Suggested Citation: Suggested Citation