The government sector,the export sector and growth

Summary A three-sector, two-input growth model is developed which potentially allows for the separate identification of government and export sector productivity differentials and externality effects. Using data from a limited sample of OECD countries (which are the only countries for which reliable capital stock data are readily available), we find that the export sector is more productive than the rest of the economy, but that neither an externality effect nor a productivity differential can be detected in the case of the government sector.The author wishes to acknowledge financial assistance from a Research Grant from the Division of Commerce of the University of Otago which funded the participation of William M. Jones as research asistant in this work. Thanks are due to Annette Godman for secretarial assistance. The referees of this journal made extensive comments on an earlier version of this paper, and the present version is substantially better thanks to them. Remaining errors are, of course, my responsibility.