Private sector shrinkage and the growth of industrialized economies: Comment

Conclusions

The main conclusion which emerges from the results in Tables 1–3 is the extreme sensitivity of Marlow's results to the countries included in the sample (particularly Japan), to the time period, and to the other variables included in the analysis. This conforms with the OECD's own analysis of these data and subsequent research based on them. It suggests that the underlying relationship being investigated is inherently unstable and that the estimated model leaves a considerable proportion of the variance of the dependent variable unexplained. These aspects of the results are consistent with most of the other empirical work on the relationship between economic growth and the size and growth of government in industrialised economies. It is to be emphasised, however, that the results presented here do not refute the claims that the size and growth of government have not had any detrimental impact on economic performance in general and economic growth in particular. What they do point to is the absence of any simple, aggregative relationships linking government size and growth to the rate of economic growth. If such relationships are to be uncovered, this will require a more detailed and complex investigation of the impact of government which is embedded in a more rigorously formulated structural model of the growth process.