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Government Size and Implications for Economic Growth PDF

90 Pages·2010·3.078 MB·English
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by Andreas Bergh, Magnus Henrekson| 2010| 90 pages| 3.078| English

About Government Size and Implications for Economic Growth

As economists and policymakers strive to understand the causes of the global financial crisis, pinpointing the relationship between government size and economic growth is crucial. In this incisive economic study, Andreas Bergh and Magnus Henrekson find that in wealthy countries, where government size is measured as total taxes or total expenditure relative to GDP, there is a strong negative correlation between government size and economic growth-where government size increases by 10 percentage points, annual growth rates decrease by 0.5 to 1 percent. Bergh and Henrekson stress that statistical correlations, even when highly significant, are not law. Some countries with high taxes enjoy above-average growth, and some countries with small governments have stagnant economies. The Scandinavian welfare states, for example, have enjoyed steady growth over the last decade despite their large governments. However, these nations compensate for high taxes by employing market-friendly policies in other areas, such as trade openness and inflation control.Government Size and Economic Growth concludes that, in every case, economic freedom is a crucial determinant of economic growth—suggesting that government intervention in the marketplace may be the wrong approach to solving the economic crisis.

Detailed Information

Author:Andreas Bergh, Magnus Henrekson
Publication Year:2010
ISBN:9780844743271
Pages:90
Language:English
File Size:3.078
Format:PDF
Price:FREE
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