Growth and the public sector: a reply
1999 (English)Report (Other academic)
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.
Place, publisher, year, edition, pages
Uppsala: Nationalekonomiska institutionen , 1999. , 10 p.
Working paper / Department of Economics, Uppsala University (Print), ISSN 0284-2904
Research subject Economics
IdentifiersURN: urn:nbn:se:uu:diva-2434ISBN: 99-2888921-XOAI: oai:DiVA.org:uu-2434DiVA: diva2:128695