Crises and Government: Some Empirical Evidence

16 Pages Posted: 26 Feb 2016

See all articles by Andrew T. Young

Andrew T. Young

Texas Tech University - Rawls College of Business

Jamie Bologna Pavlik

Texas Tech University - Department of Agricultural and Applied Economics

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Date Written: April 2016

Abstract

We examine a panel of 70 countries during 1966–2010 and utilize Reinhart and Rogoff crisis dates to estimate the effects of crises on the size and scope of government over both 5‐year and 10‐year horizons. We also estimate cross‐section regressions using 40‐year (1970–2010) changes in government variables. In general, the estimated effects of crises on government size/scope are statistically insignificant. We report reasonably robust evidence that inflation and currency crises lead to decreases in the extent of government regulations throughout an economy over a 10‐year horizon. Also, over the 40‐year period, countries that spent more years in crisis are associated with weaker legal systems and property rights. The size and scope of government appear to be persistent to the extent that even crisis episodes fail to leave a significant mark upon them. A notable exception may be that, over 40‐year periods, countries that spend more years in crisis are associated with weaker legal systems and property rights.

JEL Classification: E02, O11, O43

Suggested Citation

Young, Andrew T. and Bologna Pavlik, Jamie, Crises and Government: Some Empirical Evidence (April 2016). Contemporary Economic Policy, Vol. 34, Issue 2, pp. 234-249, 2016, Available at SSRN: https://ssrn.com/abstract=2738260 or http://dx.doi.org/10.1111/coep.12154

Andrew T. Young (Contact Author)

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

Jamie Bologna Pavlik

Texas Tech University - Department of Agricultural and Applied Economics ( email )

Suite 167, 2625 Memorial Circle
TTU Administration
Lubbock, TX 79409
United States

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