The Size of Government and U.S.-European Differences in Economic Performance

Author/Editor: Bell, Gerwin ; Tawara, Norikazu
Publication Date: April 01, 2009
Electronic Access: Free Full text (PDF file size is 509KB).
Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: An influential strand of recent research has claimed that large governments in European countries explain their weaker long-term economic performance compared to the U.S. On the other hand, despite these alleged costs, large governments have been popular with electorates. This paper seeks to shed light on this apparent inconsistency; it confirms an adverse effect of taxes on labor supply, but also finds evidence of efficiency-increasing government intervention. However, and especially in the core "Rhineland-model" European countries, actual government policies often depart from such efficient interventions, pointing to the possibility that voters prefer redistribution even at the cost of allocational efficiency.
Series: Working Paper No. 09/92
Subject(s): Public sector | United States | Europe | Public finance | National income | Government expenditures | Economic models | Cross country analysis

Author's Keyword(s): Macroeconomics | Public finance
Publication Date: April 01, 2009
Format: Paper
Stock No: WPIEA2009092 Pages: 51
US$18.00 (Academic Rate:
US$18.00 )
Please address any questions about this title to