Are government transfers harmful to economic growth? A meta-analysis |
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| Institution: | 1. School of Economics, Finance & Marketing, RMIT University, Melbourne, VIC 3000, Australia;2. Department of Economics, Monash University, Caulfield East, VIC 3145, Australia;1. Roskilde University, ISE, Department of Social Sciences and Business, Universitetsvej 1, 25.1, Roskilde 4000, Denmark;2. Catholic University of Eichstätt-Ingolstadt, Ingolstadt School of Management, Department of Economics, Auf der Schanz 49, Ingolstadt 85049, Germany;1. Bank of Greece, Economic Analysis and Research Department, 21 E. Venizelos Avenue, GR 102 50, Athens, Greece;2. American University in Cairo, Department of Economics, School of Business, New Cairo, 11835, Egypt, Middlesex University, Department of Economics, Hendon, London, NW4 4BT, UK;3. University of Athens, Department of Economics, 1 Sofokleous Street., GR 105 59, Athens, Greece;1. Bank of Italy, Italy;2. Department of Economics and Management, University of Padua & CRIEP, Italy;3. Centre d''Économie de la Sorbonne, Université Paris 1 Panthéon-Sorbonne, France;4. Department of Economics and Management, University of Padua, Italy;5. Higher School of Economics, National Research University, Moscow, Russia |
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| Abstract: | A common perception is that government transfers are harmful to economic growth. However, existing empirical evidence on this point is mixed. Potential reasons for these conflicting results include differences in the level of economic development of the countries studied, different estimation methods and different measures of government transfers. By conducting a meta-analysis of 149 estimates reported in 23 studies, we sought to understand if – and if so, to what extent – government transfers are harmful to economic growth, as well as how important the abovementioned reasons are in explaining different findings in the literature. We found that government transfers are more detrimental to economic growth in developed countries compared to less-developed countries because such transfers can have a non-monotonic effect on growth. When government transfers are substantial, as they are in developed countries, they tend to reduce growth. We also found that the growth effects of government transfers are sensitive to the measurement of the transfers, i.e., studies that use unemployment benefits instead of social security tend to report a stronger negative growth effect. |
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| Keywords: | Transfers Welfare policy Social security Taxes Economic growth |
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