Impact of Government on Growth and Trade
Anne O. Krueger, David Orsmond
NBER Working Paper No. 3545
In this paper we attempt to test the development economist's perceptions of the negative contributions of governmental activities, as well as the positive contributions of other activities, to growth. This paper provides evidence on the importance of government behavior for economic growth and, in so doing, attempts to start building a bridge between the development economics literature and the new growth theory. The focal point is the recognition that governments do more than spend and tax in manners that maximize social welfare functions: they influence incentives and regulate in ways that affect private behavior, and their spending, even on infrastructure, is not always optimal.
Published: in Wilfred Ethier, Elhanan Helpman and Peter Neary, eds., Theory, Policyand Dynamics in International Trade, Cambridge University Press, p. 237-251 Impact of Government on Growth and Trade, Cambridge: Cambridge University Press, 1993.