Premium
THE OPTIMAL GOVERNMENT SIZE: FURTHER INTERNATIONAL EVIDENCE ON THE PRODUCTIVITY OF GOVERNMENT SERVICES
Author(s) -
Karras Georgios
Publication year - 1996
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1996.tb01372.x
Subject(s) - productivity , government (linguistics) , economics , marginal product , production (economics) , product (mathematics) , government spending , marginal cost , marginal utility , government failure , public economics , public finance , economic growth , macroeconomics , market economy , microeconomics , mathematics , linguistics , philosophy , geometry , welfare
This paper estimates the optimal government size for several sets of economies by investigating the role of public services in the production process. I assume government services are optimally provided when their marginal product equals unity (the “Barro rule”). The empirical results suggest: (1) government services are significantly productive; (2) they are overprovided in Africa, underprovided in Asia, and optimally provided everywhere else; (3) the optimal government size is 23 percent for the average country but ranges from 14 percent for the average OECD country to 33 percent in South America; and (4) the marginal productivity of government services is negatively related to government size.