Abstract

Using data from 58 countries and the period 1980 to 2003, this paper analyzes how the size of government affects unemployment in developing countries. According to the regression results, a large government sector is likely to increase unemployment. A large share of government consumption in total consumption and a large share of transfers and subsidies in GDP most clearly appear to have a detrimental effect. By contrast, we do not find evidence that dominant state-owned enterprises and a large share of public investment in total investment affect unemployment, neither for bad nor for good. The results are robust to variations in specification and estimation method.

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Additional Information

ISSN
1548-2278
Print ISSN
0022-037X
Pages
pp. 315-330
Launched on MUSE
2009-05-07
Open Access
No
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