Suchergebnisse

The cross-country correlation between social trust and income equality is well documented, but few studies examine the direction of causality. We show theoretically that by facilitating cooperation, trust may lead to more equal outcomes, while the feedback from inequality to trust is ambiguous. Using a structural equation model estimated on a large country sample, we find that trust has a positive effect on both market and net income equality. Larger welfare states lead to higher net equality but neither net income equality nor welfare state size seems to have a causal effect on trust. We conclude that while trust facilitates welfare state policies that may reduce net inequality, this decrease in inequality does not increase trust. [Copyright Elsevier B.V.]

The literature on the relationship between the size of government and economic growth is full of seemingly contradictory findings. This conflict is largely explained by variations in definitions and the countries studied. An alternative approach—of limiting the focus to studies of the relationship in rich countries, measuring government size as total taxes or total expenditure relative to GDP and relying on panel data estimations with variation over time—reveals a more consistent picture. The most recent studies find a significant negative correlation: An increase in government size by 10 percentage points is associated with a 0.5 to 1 percent lower annual growth rate. We discuss efforts to make sense of this correlation, and note several pitfalls involved in giving it a causal interpretation. Against this background, we discuss two explanations of why several countries with high taxes seem able to enjoy above average growth: (i) that countries with higher social trust levels are able to develop larger government sectors without harming the economy, and (ii) that countries with large governments compensate for high taxes and spending by implementing market-friendly policies in other areas. Both explanations are supported by current research.

Using panel data from more than 100 countries around the world from 1988 through 2007, this paper examines the relationship between economic and social globalization and absolute income poverty ex post. We use the globalization index developed by Dreher (2006) and the World Bank poverty estimates. Using a fixed-effect panel based on five-year averages and using a "long run" first difference regression, we find a robust negative correlation between globalization and poverty. We further examine mechanisms and robustness by separately analyzing the effects of components of economic (trade flows and trade policies) and social globalization (information flows, personal contact and cultural proximity) respectively, controlling for growth, education, inflation, urbanization, and government consumption. Results suggest that information flows and more liberal trade restrictions are robustly negatively correlated with absolute poverty. While growth decreases poverty in the long run, only a small part of the poverty-reducing effect of globalization is mediated via growth.

In a recent paper, Colombier (2009) uses a robust estimation technique and claims to find empirical evidence that government size has not been detrimental to growth for OECD countries during the 1970 to 2001 period, and that endogenous growth theory is not corroborated. We examine the robustness of these findings, and show that Colombier's results differ from those in other recent papers not because of the estimator used, but because of the exclusion of other control variables. Adding time fixed effects to Colombier's data set, and using the same econometric method, we obtain results in line with other findings, corroborating endogenous growth theory. Adding further control variables illustrates the robustness of the negative correlation between total tax revenue and economic growth for both instrumented and non-instrumented regressions.