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Labour Costs and the Size of Government

Abstract : Given inelastic demand for labour‐intensive public services, the size of government depends positively on labour costs. OECD data exhibit a strong statistical association between government size and the business‐sector labour share of income. When the labour share is instrumented with measures of technological change, institutional variation and predetermined data it continues to positively impact government size. In contrast, transfer spending is unaffected by the labour share. The evidence is consistent with the idea that the recent decline in the labour share has contributed to the slowdown in the growth of government witnessed in much of the post‐war era.
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Contributeur : Francois Facchini <>
Soumis le : mardi 12 juillet 2016 - 12:38:35
Dernière modification le : dimanche 19 janvier 2020 - 18:38:27

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François Facchini, Mickaël Melki, Andrew Pickering. Labour Costs and the Size of Government. Oxford Bulletin of Economics and Statistics, Wiley, 2016, 79 (2), pp.251-275. ⟨10.1111/obes.12140⟩. ⟨hal-01344639⟩



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