Economic Growth and the Expanding Public Sector: A Reexamination

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Abstract
Utilizing a Granger casuality approach, we test whether there has been a causal relation between public sector growth and real economic growth rates for the OECD countries. Special emphasis is laid on feedback effects from economic growth to government growth which result from macroeconomic policy. We find that government growth has had mixed effects on economic growth rates, positive for some countries and negative for others. However, for the majority of the OECD countries, there was no discernible impact of government growth on the rate of real economic growth.

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