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DOES BIG GOVERNMENT HURT GROWTH LESS IN HIGH-TRUST COUNTRIES?

Bergh, Andreas LU and Bjørnskov, Christian (2020) In Contemporary economic policy 38(4). p.643-658
Abstract

Social trust is linked to both public sector size and to economic growth, thereby helping to explain how some countries combine high taxes with high levels of economic growth. This paper examines if social trust insulates countries against the negative effects of public sector size on growth, documented in several studies. We note that the effect is theoretically ambiguous. In panel data from 66 countries across 40 years, we find no robust evidence of insulation effects: when excluding countries with uncertain trust scores, our results suggest that big government hurts growth also in high-trust countries, and that the mechanism is by lowering private investments. (JEL H10, O11, P16, Z10).

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author
and
organization
publishing date
type
Contribution to journal
publication status
published
subject
in
Contemporary economic policy
volume
38
issue
4
pages
16 pages
publisher
Wiley-Blackwell
external identifiers
  • scopus:85081681403
ISSN
1074-3529
DOI
10.1111/coep.12467
language
English
LU publication?
yes
id
97a2e7c4-9413-44ef-be8f-42dd1a46b3b2
date added to LUP
2020-04-10 15:54:25
date last changed
2022-04-18 21:51:01
@article{97a2e7c4-9413-44ef-be8f-42dd1a46b3b2,
  abstract     = {{<p>Social trust is linked to both public sector size and to economic growth, thereby helping to explain how some countries combine high taxes with high levels of economic growth. This paper examines if social trust insulates countries against the negative effects of public sector size on growth, documented in several studies. We note that the effect is theoretically ambiguous. In panel data from 66 countries across 40 years, we find no robust evidence of insulation effects: when excluding countries with uncertain trust scores, our results suggest that big government hurts growth also in high-trust countries, and that the mechanism is by lowering private investments. (JEL H10, O11, P16, Z10).</p>}},
  author       = {{Bergh, Andreas and Bjørnskov, Christian}},
  issn         = {{1074-3529}},
  language     = {{eng}},
  number       = {{4}},
  pages        = {{643--658}},
  publisher    = {{Wiley-Blackwell}},
  series       = {{Contemporary economic policy}},
  title        = {{DOES BIG GOVERNMENT HURT GROWTH LESS IN HIGH-TRUST COUNTRIES?}},
  url          = {{http://dx.doi.org/10.1111/coep.12467}},
  doi          = {{10.1111/coep.12467}},
  volume       = {{38}},
  year         = {{2020}},
}