Day By Day

Wednesday, June 13, 2012

Government and Growth

A recent study by two Swedish economists shows quite clearly that the growth of government inhibits economic growth. The negative correlation is clear: a ten percent increase in the size of government results in 0.5 to 1.0 percent lower annual growth rate. The study also shows that societies characterized by high levels of social trust are able to bear the costs of big government better than those that aren't, and that governments that impose high levels of taxation on businesses are able to mitigate the effects to some extent by promoting pro-growth policies in other areas.

Read the study here.

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