Population Size and the Size of Government

Discussion Paper Series, Wilfried Guth Endowed Chair for Constitutional Political Economy and Competition Policy, University of Freiburg, No. 2018-03

27 Pages Posted: 22 Jul 2018

See all articles by Tim Krieger

Tim Krieger

University of Freiburg - Department of Economics

Daniel Meierrieks

WZB Berlin Social Science Center

Multiple version iconThere are 2 versions of this paper

Date Written: June 29, 2018

Abstract

We examine the effect of population size on government size for a panel of 130 countries for the period between 1970 and 2014. We show that previous analyses of the nexus between population size and government size were incorrectly specified, not accounting for cross-sectional dependence, non-stationarity and cointegration as well as parameter heterogeneity. Using a panel time-series approach that adequately models these issues, we find that population size has a positive long-run effect on government size. This finding suggests that the detrimental effects of population size on government size (primarily due to a greater risk of social conflict) dominate its beneficial ones (primarily due to scale economies). We also show that population size increases government size especially in countries that are vulnerable to social conflict due to ethnic heterogeneity.

Keywords: government size; country size; social conflict; ethnic fractionalization; non-stationarity; cross-sectional dependence; panel cointegration; parameter heterogeneity

JEL Classification: H11; H50

Suggested Citation

Krieger, Tim and Meierrieks, Daniel, Population Size and the Size of Government (June 29, 2018). Discussion Paper Series, Wilfried Guth Endowed Chair for Constitutional Political Economy and Competition Policy, University of Freiburg, No. 2018-03, Available at SSRN: https://ssrn.com/abstract=3205045 or http://dx.doi.org/10.2139/ssrn.3205045

Tim Krieger (Contact Author)

University of Freiburg - Department of Economics ( email )

University of Freiburg
Wilhelmstr. 1b
Freiburg, D-79085
Germany

HOME PAGE: http://www.wguth.uni-freiburg.de

Daniel Meierrieks

WZB Berlin Social Science Center ( email )

Reichpietschufer
50
Berlin, D-10785
Germany

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