Scandinavian Working Papers in Economics
Working Paper Series,
Uppsala University, Department of Economics
No 1999:1: Growth and the Public Sector: A reply
Jonas Agell (), Thomas Lindh () and Henry Ohlsson ()
Additional contact information
Jonas Agell: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Thomas Lindh: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Henry Ohlsson: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Abstract: Fölster and Henrekson (1998) claim that they, by addressing a number of econometric problems, can establish that it is likely that economies with a large public sector grow more slowly than economies with a small public sector. But their regressions are fundamentally flawed. Re-estimating their growth equation using theoretically valid instruments, we find that the growth effect of the public sector is statistically insignificant, and much smaller than the point-estimates reported by Fölster and Henrekson. This is consistent with the agnostic conclusion, drawn by us and many others, that cross-country growth regressions are unlikely to give a reliable answer to whether a large public sector is growth promoting or retarding.
Keywords: economic growth; public sector; taxation; government expenditure; cross-country regressons
10 pages, December 19, 1998
Questions (including download problems) about the papers in this series should be directed to Ulrika Öjdeby ()
Report other problems with accessing this service to Sune Karlsson ().
This page generated on 2024-02-05 17:14:00.