Big government and economic growth: According to research from the World Bank: Over the last 15 years, higher initial government size has lead to slower economic growth. In Europe, a 10 percentage point increase in initial government size leads to a reduction in annual growth by 0.6-09 percentage points...Looking at initial government size allows us to rule out reverse causality: low growth or contractions could lead to higher government spending rather than the other way around. Additionally: Large tax burdens tend to reduce growth-but the evidence is less compelling than for public expenditures- perhaps because Western Europe’s tax system is more growth friendly than the systems of the four Anglo-Saxon countries Europe combines a high tax burden and labor taxes with low corporate tax rates and a greater reliance on indirect taxes.” The authors also find that social transfers reduce growth while government investment increases it. Read the study: siteresources.worldbank.org/ECAEXT/Resources/258598-1284061150155/7383639-1323888814015/8319788-1326139457715/fulltext_ch7.pdf
Posted on: Mon, 08 Sep 2014 19:00:01 +0000
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