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

26 Pages Posted: 4 Dec 2006  

Matthew John Higgins

Georgia Institute of Technology & NBER; National Bureau of Economic Research (NBER)

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

Multiple version iconThere are 2 versions of this paper

Date Written: November 2006

Abstract

We use new US county level data (3,058 observations) from 1970 to 1998 to explore the relationship between economic growth and the size of government at three levels: federal, state and local. Using 3SLS-IV estimation we find that the size of federal, state and local government all either negatively correlate with or are uncorrelated with economic growth. We find no evidence that government is more efficient at more or less decentralized levels. Furthermore, while we cannot separate out the productive and redistributive services of government, we document that the county-level income distribution became slightly wider from 1970 to 1998. Our findings suggest 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, Fiscal Federalism, Oates' Decentralization Theorem, County-Level Data

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 (November 2006). Emory Public Law Research Paper No. 07-4; Emory Law and Economics Research Paper No. 07-5; Bar Ilan Univ. Pub Law Working Paper No. 06-8. Available at SSRN: https://ssrn.com/abstract=949007 or http://dx.doi.org/10.2139/ssrn.949007

Matthew John Higgins (Contact Author)

Georgia Institute of Technology & NBER ( email )

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National Bureau of Economic Research (NBER) ( email )

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Andrew T. Young

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

Daniel Levy

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 )

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Atlanta, GA 30322-0001
United States

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

Rimini Center for Economic Analysis ( email )

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Rimini (RN), RN 47900
Italy

HOME PAGE: http://www.rcfea.org/

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