Hostname: page-component-cd9895bd7-8ctnn Total loading time: 0 Render date: 2024-12-27T02:45:35.868Z Has data issue: false hasContentIssue false
  • English
  • Français

EXPLORING CROSS-COUNTRY VARIATION IN GOVERNMENT SHARES: WHAT CAN WE LEARN FROM RELATIVE PRODUCTIVITIES?

Published online by Cambridge University Press:  07 February 2012

Maksym Obrizan
Maksym Obrizan*
Affiliation:
Kyiv School of Economics and Kyiv Economics Institute
*
Address correspondence to: Maksym Obrizan, 13 Yakira Street, Suite 318, Kyiv 04119, Ukraine; e-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

Government shares in total output are characterized by significant variation across countries. I noticed a strong negative correlation between government consumption shares and the price of government services in terms of private consumption. Motivated by this empirical observation, I developed a neoclassical growth model with added government that is capable of matching the variation in government shares very closely using only relative prices. In addition, I provide empirical evidence showing that the relative price of government consumption increases with income, which is consistent with distortions prevailing in poor countries. These two observations combined imply that government shares tend to be higher in poorer countries.

Keywords

Government ConsumptionRelative Government SharesRelative International PricesNeoclassical Growth ModelPenn World Table
Type
Articles
Information
Macroeconomic Dynamics , Volume 17 , Issue 2 , March 2013 , pp. 356 - 372
Copyright
Copyright © Cambridge University Press 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Cooley, Thomas and Prescott, Edward (1995) Economic growth and business cycles. In Cooley, Thomas (ed.), Frontiers of Business Cycle Research, pp. 1–38. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Deaton, Angus and Heston, Alan (2008) Understanding PPPs and PPP-Based National Accounts. NBER working paper 14499.CrossRefGoogle Scholar
Herrendorf, Berthold and Valentinyi, Akos (in press) Which sectors make the poor countries so unproductive? Journal of the European Economic Association.Google Scholar
Heston, Alan, Summers, Robert, and Aten, Bettina (2006) Penn World Table Version 6.2. Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, September.Google Scholar
Hsieh, Chang-Tai and Klenow, Peter (2007) Relative prices and relative prosperity. American Economic Review 97 (June), 562–585.CrossRefGoogle Scholar
Khan, M. Shahbaz (1990) Relative Price Changes and the Growth of the Public Sector. The World Bank WPS 423, Washington, DC.Google Scholar
Kravis, Irving, Heston, Alan, and Summers, Robert (1982) World Product and Income: International Comparisons of Real Gross Product. Baltimore, MD: Johns Hopkins University Press.Google Scholar
Meltzer, Allan and Richard, Scott (1981) A rational theory of the size of government. Journal of Political Economy 89, 914–927.CrossRefGoogle Scholar
Mueller, Dennis (2003) Public Choice III. New York: Cambridge University Press.CrossRefGoogle Scholar
Restuccia, Diego and Urrutia, Carlos (2001) Relative prices and investment rates. Journal of Monetary Economics 41, 93–121.CrossRefGoogle Scholar
Summers, Robert and Heston, Alan (1991) The Penn World Table (Mark 5): An expanded set of international comparisons, 1950–1988. Quarterly Journal of Economics 106 (2), 327–368.CrossRefGoogle Scholar
Valentinyi, Akos and Herrendorf, Berthold (2008) Measuring factor income shares at the sectoral level. Review of Economic Dynamics 11, 820–835.CrossRefGoogle Scholar