Tracing the Link between Government Size and Growth: The Role of Public Sector Quality

27 Pages Posted: 13 Apr 2013

See all articles by Daniel Oto‐Peralías

Daniel Oto‐Peralías

Universidad Pablo de Olavide

Diego Romero‐Ávila

Universidad Pablo de Olavide

Date Written: May 2013

Abstract

This paper shows evidence of strong heterogeneity in the relationship between government size and growth, depending on the quality of public sector institutions. Focusing on a wide sample of developed and developing countries over the period 1981–2005, we find that government size reduces growth when bureaucracy quality is low, whereas no significant effect is observed for sufficiently high levels of bureaucracy quality. The results hold both in cross‐section and panel data analyses and are robust to a large number of robustness checks. These findings have important implications for assessing the role of government size in economic growth.

Suggested Citation

Oto‐Peralias, Daniel and Romero‐Ávila, Diego, Tracing the Link between Government Size and Growth: The Role of Public Sector Quality (May 2013). Kyklos, Vol. 66, Issue 2, pp. 229-255, 2013. Available at SSRN: https://ssrn.com/abstract=2250247 or http://dx.doi.org/10.1111/kykl.12019

Daniel Oto‐Peralias (Contact Author)

Universidad Pablo de Olavide

Seville

Diego Romero‐Ávila

Universidad Pablo de Olavide

No Address Available

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