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.
Author: | Daniel; Diego , Oto-Peralías; Romero-Avila |
Volume: | 2012.3 |
Publisher: | INFER |
Year: | 2012 |
No. of pages: | 40 |
Category: |