Government size,composition of public spending and economic growth in Brazil

The performance of the fiscal policy is largely affected by the relationship between government size, composition of public spending and economic growth. We use a theoretical framework to find optimal relations among these variables and confront them with a panel data for the Brazilian states. Private capital and government spending are substitute inputs in production as the Brazilian states require provision of public spending to fill gaps in the underdeveloped private sector. Public investment and current government expenditures are combined in fixed ratios in the overall government spending due to strong rigidity of the public budget. The optimal share of public investment is considerably lower than current expenditures, as occurs in developing countries characterized by low economic dynamism. Finally, the average tax burden from the data is below the estimated optimal level, meaning that there is space for increasing tax rate without harming economic growth for some Brazilian states.     

Growth maximizing government size,social capital,and corruption

Our paper intersects two topics in growth theory: the growth maximizing government size and the role of Social Capital in development. We modify a simple overlapping generations framework by introducing two key features: a production function à la Barro together with the possibility that public officials steal a fraction of public resources under their own control. As underlined by the literature on corruption, Social Capital affects public officials' accountability through many channels which also affect the probability of being caught for embezzlement and misappropriation of public resources. Therefore, in our endogenous growth model such probability is taken as a proxy of Social Capital. We find that maximum growth rates are compatible with Big Government size, measured both in terms of expenditures and public officials, when associated with high levels of Social Capital.     

How does public spending affect technical efficiency? Some evidence from 15 European countries

The relationship between government size and economic growth has been widely debated. Revisiting the subject from a distinct angle with respect to the mainstream approach, we provide an empirical analysis of the impact of government size on technical efficiency. The aim of this paper is to estimate the impact of public sector's size and of public expenditure components on 15 European countries’ technical efficiency from 1996 to 2014 by using a True Random Effect model. Using the total public expenditure as a proxy for the government size we estimate simultaneously national optimal production function and technical efficiency by controlling for income distribution and institutional quality. Our main findings show that the effect of public sector's size on efficiency is positive while the type of public expenditures may have both positive and negative impact. In more details, results suggest that education and health expenditures have a positive effect on technical efficiency, while others have a negative impact.     

政府公共资本投资的长期经济增长效应

本文首先建立一个包含政府公共资本投资的两部门内生增长模型,并把公共资本投资分为政府物质资本投资和人力资本投资,从而对公共资本投资的长期经济增长效应进行理论分析。结论是,两种形式的公共资本投资对长期经济增长都可能具有正效应也可能具有负效应,取决于民间经济主体消费跨时替代弹性大小。其次,我们利用向量自回归分析框架,对我国1978—2004年间公共资本投资对长期经济增长的影响作实证分析。结论是,我国两种形式的公共资本投资与经济增长之间存在着长期均衡关系,其中政府公共物质资本投资对长期经济增长的正影响更为显著,而政府公共人力资本投资对长期经济增长的正影响较小,且在短期内不利于经济增长。这一结论对我国今后科学制定财政政策和选择公共投资领域都具有重要意义。     

Property Rights,Public Enforcement,and Growth

We study the link between public enforcement of property rights, innovation investments, and economic growth in an endogenous growth framework with an expanding set of product varieties. We find that a government can assure positive equilibrium growth through public employment in the enforcement of property rights, if the economic environment is sufficiently favorable to growth and/or if public enforcement is sufficiently effective. However, in terms of welfare, an equilibrium path without property‐rights protection and growth might be preferable. In this case, the enforcement of property rights involves too much reallocation of labor from production and research towards the public sector.     

DO TAX AND EXPENDITURE LIMITATIONS AFFECT THE SIZE AND GROWTH OF STATE GOVERNMENT?

This paper focuses on citizens' ability to restrict the size and growth of state government through the use of tax and expenditure limitations (TELs). Most TEL laws are not designed to stop public sector growth but are intended to cap it relative to personal income growth. Evidence indicates that the design of TEL laws increases the elasticity of government size (and growth) with respect to income. Thus, TEL laws, as they currently are written, allow states with high income growth to keep increasing the size of the public sector. Meanwhile, they prevent states with low income growth from doing likewise. While TELs restrict government size and growth in states with below average income, in general they have no significant effect on the size or growth of government. Therefore, as long as income growth is high, TELs end up as little more than political cover for state legislatures.     

Social security, public education and the growth-inequality relationship

We study how the relationship between economic growth and inequality depends upon the levels of funding of two of the largest government programs, public education and social security. We do this in the context of an overlapping generations economy with heterogeneous agents where the government collects a tax on labor income to finance these programs. We show that in our model an increase in government spending on social security reduces income inequality and can have a non-monotonic effect on growth. When the initial level of social security funding is low, as is the case in most poor economies, then its increase will enhance growth. When its funding level is high as is typical for developed countries, we show that its further increase can slow down growth while reducing income inequality. These results obtain regardless of whether the increase in social security funding is financed by a tax increase or by cutting the public education budget. We also find that the effects of increasing the level of public education expenditures or the overall size of the government budget (holding the budget composition fixed) are characterized by similar non-monotonic growth-inequality relationships.     

Industrial structure and economic performance: The role of productive public expenditure

I consider productive government spending and preference for diversity in an imperfectly competitive macroeconomic framework, and analyze how differences in industrial structure affect economic growth and the welfare level. Two main findings emerge from the analysis. First, the optimal ratio of government spending is related to the extent of public expenditure externalities and preference for diversity. Second, the vertical separation regime leads to a higher economic growth rate and welfare level than the vertical integration regime, provided that the degree of monopoly power is relatively small.     

Efficient government size: France in the 20th century

The benefits and costs of government suggest an efficient government size. We investigate efficient government size by analyzing the relation between public spending and real GDP for France in the period 1896–2008. The results show a co-integration nonlinear relationship. Our time-series data on France represents one of the longest periods studied in literature. Our empirical findings suggest that efficient government size measured by public spending was reached when public spending was around 30% of GDP. Conclusions point to particularities of countries that suggest efficient government size is specific to different countries.     

经济发展中政府的财政行动逻辑及其影响

近年来,中央和地方政府的财政行动主要是为了获得拉动经济快速增长的资本积累。具体表现为:地方政府高度倚重土地财政收入,并将其作为拉动经济增长的投资资金;同时,中央和地方均高度重视通过政府投资来拉动经济增长。然而,政府的财政行动却导致中国经济陷入未来增长的不确定和发展环境不公的困境。作为应对,政府应在财政公共化的框架下逐步完成省以下分税分级财政体制的构建、规范土地出让金用途,以及建立以公共服务为导向的干部政绩考核制度。     

Public Expenditures,Growth, and Distribution in a Mixed Regime of Education with a Status Motive

This paper tackles the issue of growth, distribution, and the provision of public services in a growth model with human capital accumulation where heterogeneous individuals decide whether to attend a publicly funded education regime or a privately funded one. Heterogeneity of individuals is introduced via their status‐motivation which is shown to affect their choice of education. In such a framework, we obtain an inverted‐U shaped relationship between growth and the size of the public education sector. In contrast with the general wisdom, we show that a larger public education sector is compatible with both a reduction of inequalities and an increase of long‐term growth. Although we demonstrate that in a majoritarian system all individuals agree on a lower size of the public education regime than that which maximizes growth, our analysis also highlights the tension between the direct beneficiaries and nonbeneficiaries from the public regime.     

增长的政治经济逻辑：政府分权与激励的视角

政府分权是实现我国增长的重要制度安排。本文以中央与地方政府、地方政府与微观主体分权为逻辑起点,以制度-结构-行为-绩效为分析框架,从激励与约束的视角研究地方政府行为。研究认为,在分权激励下,地方会展开“中国式的政府竞争”,并过多的保护资本,而忽视劳动力、土地、环境等要素的产权。非均衡的产权制度在经济发展前期能够实现公众与地方政府的共容利益。随外在约束条件的不断变化,在原有的激励模式下,“包容性增长”被“排斥性增长”所替代。在缺乏公众的约束下,地方政府带来激励偏差会加大。因此,作对地方政府的激励是转变经济发展方式的关键。     

Growth effects of public expenditure on the state and local level: evidence from a sample of rich governments

There is a vast empirical literature investigating the relationship between government size and economic growth. But the empirical evidence of growth effects of public expenditure using cross-country regressions is still inconclusive. According to a number of authors this is not surprising since the negative relationship only applies for rich countries with a large public sector. Restricting their analysis on rich countries only they can show the predicted negative impact. Naturally, a selection of a sub-sample of rich countries is always somewhat arbitrary. Another possibility is to concentrate on governments within a rich country. However, only few studies investigate the effect of state and local spending on economic growth. This study concentrates on the relationship between public expenditure and economic growth within a rich country using the full sample of state and local governments from Switzerland over the 1981–2001 period. The general finding is a fairly robust negative relationship between government size and economic growth. However, in contrast to public spending from operating budgets there is no significant impact on economic growth by expenditure from capital budgets.     

Volatility and growth: Governments are key

There exists a persistent disagreement in the literature over the effect of business cycles on economic growth. This paper offers a solution to this disagreement, suggesting that volatility carries not only a positive direct effect, but also a negative indirect effect, operating through the insurance mechanism of government size. Theoretically, the net growth effect of volatility is then ambiguous. The paper reveals the underlying endogeneity of government size in a balanced panel of 90 countries from 1961 to 2010. In practice, the negative indirect channel dominates in democracies, but with less power to choose public services in autocratic regimes the positive direct effect takes over. Consequently, volatile growth rates are detrimental to growth in democracies, but beneficial to growth in autocracies. The empirical results suggest that a one standard deviation increase of volatility lowers growth by up to 0.52 percentage points in a democracy, but raises growth by 1.66 percentage points in a total autocracy. These findings point to a crucial intermediating role of governments in the relationship between volatility and growth. Both the size of the public sector and the regime form assume key roles.     

Government size,decentralization and growth: empirical evidence from Italian regions

The aim of this study is to empirically assess the relationship among government size, decentralization and economic growth in Italian ordinary regions. The empirical analysis, based on a panel dataset on Italian regions, provides evidence in support of the existence of an inverted U-shaped relationship between public expenditure and economic growth, that depends on the degree of fiscal decentralization. In particular, according to our estimates on the specific Italian case, the optimal degree of decentralization is around 32%, while the optimal government size value is approximately 52%.     

Public consumer goods, output-generated variable returns, and labor supply

This paper develops a simple general-equilibrium model of a closed economy. The economy under consideration produces two final goods, one private and one public, which are both produced with labor and an intermediate good under constant returns to scale. The intermediate good is produced by labor alone, and its production is subject to output-generated variable returns to scale. The public good can be interpreted as government spending on environmental quality, police protection, cultural activities, and publicly funded health care. The model is used to examine the impact of an exogenous change in labor supply on the size of the government, relative prices, and welfare. Within the context of the present study, an increase in labor supply can be attributed to either exogenous immigration or population growth. The model is also used to examine the relationship between the size of the country and the pattern of trade.     

THE EFFECT OF GOVERNMENT SPENDING ON ECONOMIC GROWTH: TESTING THE NON‐LINEAR HYPOTHESIS

Theoretical models suggest a non‐linear relationship between government size and long‐run economic growth. However, testing this hypothesis empirically in cross‐country studies is complicated by the endogeneity of government spending and the accurate identification of inflexion points. This paper examines the non‐linear hypothesis by incorporating threshold analysis in a cross‐country growth regression. The methodology utilizes a sample‐splitting framework and follows an objective strategy for identifying and testing changes in the slope. The results provide evidence in support of the non‐linear hypothesis for a broad panel of countries.     

扶贫与地方政府公共支出-基于"八七扶贫攻坚计划"的经验研究

扶贫是否会引发地方政府公共支出决策的扭曲,有待实证检验。本文采用回归间断点设计方法(RDD方法),实证分析了"八七扶贫攻坚计划"(1994—2000年)对地方政府公共支出的影响。研究发现:该计划使国贫县获得了更多的财力支持,财政供养人口规模增长也更快;但其行政管理费用增长较慢,生产性和服务性公共支出增长较快。上述发现说明:扶贫导致地方政府将较多财政资金用于有助于减少贫困的生产建设和公共服务,而非行政消费。     

International Factor Mobility, Government Size and Welfare

An examination of the available data reveals that the size of government varies considerably across time and countries. By making use of a simple general equilibrium model, this paper demonstrates that size of government is affected by the availability of capital and labour within an economy. Specifically, this paper utilises a model of a closed economy that produces one-private and one-public good. Both goods are produced by means of capital and labour. Production functions are subject to constant returns to scale and perfect competition prevails in all markets. The elasticity of substitution between the public and the private good is greater than unity and there is no international factor mobility in the initial equilibrium. The size of government is measured by total spending on the public good as a proportion of the total expenditure on the private and public goods. It is shown that capital (labour) inflow can decrease (increase) the size of government. Capital inflow increases welfare if the private good is relatively capital intensive whereas labour inflow increases welfare if the public good is relatively capital intensive.