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The Effect of Federal Government Size on Long-Term Economic Growth in the United States, 1791-2009

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DOI: 10.4236/me.2012.38120    4,762 Downloads   6,708 Views   Citations

ABSTRACT

We consider whether there is statistical evidence for a causal relationship between federal government expenditures and growth in real GDP in the United States, using available data going back to 1791. After studying the time-series properties of these variables for stationarity and cointegration, we investigate Granger causality in detail in the context of a Vector Error Correction Model. While we find causal evidence that faster GDP growth leads to faster growth in government spending, we find no evidence supporting the common assertion that a larger government sector leads to slower economic growth.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

F. Guerrero and E. Parker, "The Effect of Federal Government Size on Long-Term Economic Growth in the United States, 1791-2009," Modern Economy, Vol. 3 No. 8, 2012, pp. 949-957. doi: 10.4236/me.2012.38120.

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