O40 Economic Growth and Aggregate Productivity: General

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

JEL code(s)	E60 Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General E62 Fiscal Policy E64 Incomes Policy; Price Policy E69 Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: Other H50 National Government Expenditures and Related Policies: General H70 State and Local Government; Intergovernmental Relations: General O11 Macroeconomic Analyses of Economic Development O18 Economic Development: Regional, Urban, and Rural Analyses O40 Economic Growth and Aggregate Productivity: General O43 Institutions and Growth O47 Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence O50 Economywide Country Studies: General O51 Economywide Country Studies: U.S.; Canada R11 Regional Economic Activity: Growth, Development, and Changes
Keywords	Convergence, County-Level Data, Economic Growth, Equity, Federal Government, Fiscal Federalism, Fiscal Policy, Government Activity, Income Distribution, Local Government, State Government
Authors:	Matthew J. Higgins Andrew T. Young Daniel Levy
Date published:	January 1, 2009
Abstract:	We use US county level data (3,058 observations) from 1970 to 1998 to explore the relationship between economic growth and the extent of government employment at three levels: federal, state and local. We find that increases in federal, state and local government employments are all negatively associated with economic growth. We find no evidence that government is more efficient at lower levels. While we cannot separate out the productive and redistributive services of government, we document that the county-level income distribution became slightly more unequal from 1970 to 1998. For those who justify government activities in terms of equity concerns – perhaps even trading off economic growth for equity – the burden falls on them to show that the income distribution would have widened more in the absence of government activities. We conclude that a release of government-employed labor inputs to the private sector would be growth-enhancing.
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Convergence and Cycles in the Euro Zone

JEL code(s)	C32 Multiple or Simultaneous Equation Models: Time-Series Models O40 Economic Growth and Aggregate Productivity: General
Keywords	balanced growth, error correction mechanism, kalman filter, signal extraction, stochastic trend, unobserved components
Series Number:	EABCN/CEPR Discussion Paper 11/2004
Authors:	Andrew Harvey Vasco M Carvalho
Date published:	November 1, 2004
Abstract:	Multivariate unobserved components (structural) time series models are fitted to annual post-war observations on real income per capita in countries in the euro zone. The aim is to establish stylized facts about convergence as it relates both to long-run income levels and to cycles. The analysis is based on a new model in which convergence components are combined with a common trend and similar cycles. These convergence components are formulated as a second-order error correction mechanism that ensures that the extracted components change smoothly, thereby giving a clearer decomposition into long-run movements and cycles.
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