Growth and the public sector: A reply
1999 (English)In: European Journal of Political Economy, ISSN 0176-2680, E-ISSN 1873-5703, Vol. 15, no 2, 359-366 p.Article in journal (Refereed) Published
Fölster and Henrekson [Fölster, S., Henrekson, M., 1999. Growth and the public sector: A critique of the critics. European Journal of Political Economy 15, 337–358] claim that, by addressing a number of econometric problems, they 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 that they report. This is consistent with the agnostic conclusion, drawn by us and others, that cross-country growth regressions are unlikely to provide a reliable answer as to whether a large public sector is growth promoting or retarding.
Place, publisher, year, edition, pages
1999. Vol. 15, no 2, 359-366 p.
economic growth, public sector, cross-country regressions
Research subject Economics
IdentifiersURN: urn:nbn:se:uu:diva-29036DOI: 10.1016/S0176-2680(99)00011-7OAI: oai:DiVA.org:uu-29036DiVA: diva2:56932