government size and economic growth

[Azazello1313]

…most recent studies typically find a negative correlation between total government size and economic growth. …the most convincing studies are those most recently published. …In general, research has come very close to a consensus that in rich countries there is a negative correlation between total government size and growth. It appears fair to say that an increase in total government size of ten percentage points in tax revenue or expenditure as a share of GDP is on average associated with an annual lower growth rate of between one-half and one percentage point.

 

 

now check out table B-1 here (p. 135 of the pdf) for an indication of what kind of impact a change of even a tenth of a percent of GDP can have on projected revenues, deficits, etc.

[Azazello1313]

also this:

 

At what point does indebtedness become a problem? In our study “Growth in a Time of Debt,” we found relatively little association between public liabilities and growth for debt levels of less than 90 percent of GDP. But burdens above 90 percent are associated with 1 percent lower median growth. Our results are based on a data set of public debt covering 44 countries for up to 200 years. The annual data set incorporates more than 3,700 observations spanning a wide range of political and historical circumstances, legal structures and monetary regimes.

 

We aren’t suggesting there is a bright red line at 90 percent; our results don’t imply that 89 percent is a safe debt level, or that 91 percent is necessarily catastrophic. Anyone familiar with doing empirical research understands that vulnerability to crises and anemic growth seldom depends on a single factor such as public debt. However, our study of crises shows that public obligations are often hidden and significantly larger than official figures suggest.

 

US debt is currently very close to 100% of GDP, and growing fast.

 

the time to do something is NOW. and that "something" is not more 'stimulus' or higher taxes/spending.

Edited July 14, 2011 by Azazello1313

[wiegie]

and that "something" is not more 'stimulus' or higher taxes/spending.

The person who has authored the following papers in the last two years disagrees with you strongly:

 

 

--"Fannie Mae, Freddie Mac and the Freedman’s Savings Bank". Review of Black Political Economy, forthcoming.

 

--“Panel Evidence on Economic Freedom and Growth in the United States” European Journal of Political Economy, forthcoming

 

--“Panel Evidence on Finance, Institutions, and Economic Growth” Applied Economics, forthcoming.

 

--“Investing in Institutions” Economics and Politics Vol. 22(3), pp. 419-445, 2010.

 

--"Income Inequality and the Business Cycle: A Threshold Cointegration Approach." Economic Systems, Vol. 33(3), pp. 278-292, 2009.

 

--"Healing the Global Financial Crisis” The Journal of Corporate Accounting & Finance, Vol. Sept/October 2009.

 

--“A note on finance, inflation, and economic growth” Economics Bulletin, Vol. 29(2), pp. 749-759, 2009.

[Clubfoothead]

also this:

 

 

 

US debt is currently very close to 100% of GDP, and growing fast.

 

the time to do something is NOW. and that "something" is not more 'stimulus' or higher taxes/spending.

 

[Azazello1313]

The person who has authored the following papers in the last two years disagrees with you strongly

 

so why should I listen to that guy and ignore ken rogoff?

 

in any case, any comment on the substance?

 

an increase in total government size of ten percentage points in tax revenue or expenditure as a share of GDP is on average associated with an annual lower growth rate of between one-half and one percentage point.

burdens above 90 percent are associated with 1 percent lower median growth

 

are these findings inaccurate? meaningless?