levy_06

Emory University
Department of Economics
Working Papers

Title:

Federal, State, and Local Governments: Evaluating their Separate Roles in US Growth

Number: 06-14

Author:
Matthew J. Higgins, Daniel Levy and Andrew T. Young

Issue Date: November 2006

Abstract: We use US county level data (3,058 observations) from 1970 to 1998 to explore the relationship between economic growth and the size of government at three levels: federal, state and local. Using 3SLS-IV estimation we find that the size of federal, state and local government all either negatively correlate with or are uncorrelated with economic growth. We find no evidence that government is more efficient at more or less decentralized levels. Furthermore, while we cannot separate out the productive and redistributive services of government, we document that the county-level income distribution became slightly wider from 1970 to 1998. Our findings suggest that a release of government-employed labor inputs to the private sector would be growth-enhancing.

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Title:	Federal, State, and Local Governments: Evaluating their Separate Roles in US Growth
Number:	06-14
Author:	Matthew J. Higgins, Daniel Levy and Andrew T. Young
Issue Date:	November 2006
Abstract:	We use US county level data (3,058 observations) from 1970 to 1998 to explore the relationship between economic growth and the size of government at three levels: federal, state and local. Using 3SLS-IV estimation we find that the size of federal, state and local government all either negatively correlate with or are uncorrelated with economic growth. We find no evidence that government is more efficient at more or less decentralized levels. Furthermore, while we cannot separate out the productive and redistributive services of government, we document that the county-level income distribution became slightly wider from 1970 to 1998. Our findings suggest that a release of government-employed labor inputs to the private sector would be growth-enhancing.