Scholarly Comments on Academic Economics

Does Economic Performance Correlate with Big Government?

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Development is a systematic and evolutionary process, which is not limited to the improvement of economic performance per se. Institutions that support economic freedom and governments that may or may not support development and freedom probably evolve together. A recent study by La Porta et al (1999) examines these relationships and finds, among other things, that there is a positive link between big government and economic development. We reexamine these links with international cross-sectional data for five periods and find that economic freedom and development do reinforce each other but that the size and scope of government does not play a strong role.