Economic performance, government size, and institutional quality

Abstract

This paper studies the empirical link between government size, institutions and economic activity using a panel of 140 countries over 40 years. Our results, robust under different econometric techniques, show mostly a negative effect of government size on output, while institutional quality has generally a positive impact. Moreover, the detrimental effect of government size on economic activity is stronger the lower institutional quality, and the positive effect of institutional quality on output increases with smaller government sizes.

The impact of fiscal consolidations on the functional components of government expenditures

“…The state of public finances and the economic conditions have been regarded in the literature as the most important conditionings of fiscal consolidations (Perotti, 1999;Giavazzi et al, 2000;Blanchard and Perotti, 2002;Alesina et al, 2008;Barrios et al, 2010;Agnello, Caporale and Sousa, 2013;Agnello et al, 2014a;Anderson et al, 2014;Afonso and Jalles, 2016). Fiscal consolidations are usually implemented when the stance of governments is weak, frequently related to large public debts; the domestic economy is not always thriving as expected and ends up being negatively affected by the austerity measures in the short-term.…”

“…Assessing the trade-off between consolidation of public finances and economic growth is fundamental for the formulation of effective policies. Several studies look at this relation and try to identify the determinants, impact, timing and the length of fiscal consolidations (Alesina et al, 2008;Alesina and Ardagna, 2010;Barrios et al, 2010;Cimadomo et al, 2010;Sanz, 2011;Cimadomo, 2012;Ball et al, 2013;Bi et al, 2013;Afonso and Jalles, 2014;Anderson et al 2014;Agnello and Sousa, 2014;Cafiso and Cellini, 2014;Agnello el al., 2015;Cugnasca and Rother, 2015;Afonso and Jalles, 2016;Agnello et al, 2016). Others take into account the kind of consolidation to show that successful consolidations are primarily based on spending cuts rather than increasing taxes (Alesina and Perotti, 1995 A fixed-effects estimator is used in the empirical analysis and the results show that spending on public services increases during fiscal consolidations, while spending on defence, public order, health, education and social protection is significantly cut.…”

Quantification of the Size of Local Public Administration: Empirical Study of Polish Regions

“…(2015), Sabra (2016) and Sriyana (2016). A slightly different approach is presented by Afonso and Jalles (2016). To express government size, the authors use transfers and subsidies (expressed as percentage of GDP), the tax system (expressed as top marginal tax rates), government consumption expenditures (expressed as percent-age of total consumption), and the number of government enterprises.…”

“…The problem of measuring the size of a government, as well as attempts to optimise its size from the point of view of the economy is the topic of continuous debate and abounds in numerous attempts of researchers (see: Scully, 2000Scully, , 2002Scully, , 2003Handoussa and Reiffers, 2003;Tanzi and Schuknecht, 2007;Forte and Magazzino, 2011;Magazzino, 2012;Di Matteo, 2013;Kolařík et al, 2014, Di Liddo et al, 2015, Afonso and Jalles, 2016Obydenkova and Salahodjaev, 2017, p. 7, and many others). The scholars mentioned above highlight the problem of methodology in measuring the size of a government and including its adaptation to the lower levels of territorial division of a country.…”

Institutional Mechanism For The Restoring Of The Reginal Business Activity

“…According to the opinion of a number of foreign scientists, the state's presence in the economic life of society is felt the more strongly, the lower the quality of its institutions is. At the same time, the high quality of established institutions has a positive impact on the level of socio-economic development of the territories and contributes to the reduction of state interference in the economy (Afonso & Jalles, 2016). National scientists also note that the quality of institutions affects the level of economic activity in the Russian regions, that is, the subjects of the Russian Federation with a higher level of institutional capacity produce a higher amount of GRP per person (Kaneva & Untura, 2017).…”