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Is there any analysis done to empirically determine the relationship between government size and prosperity of a country?

I am not really that familiar with empirical economic research. But it is political argument you run into frequently.

What does the data say?

I would say there are several things to account for in such an analysis. Rich countries could become more dovish(??) and start spending on more on public services when they become rich, hence some correlation analysis would be useless. Also I assume increased spending in one year's budget increases output for that year, I am however more interested on long-term effects.

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In Does Government Size Affect Per-Capita Income Growth? A Hierarchical Meta-Regression Analysis, Churchill, Ugur and Yew write

Since the late 1970s, the received wisdom has been that government size (measured as the ratio of total government expenditure to gross domestic product (GDP) or government consumption to GDP) is detrimental to economic growth. We conduct a hierarchical meta-regression analysis of 799 effect-size estimates reported in 87 primary studies to verify if this assertion is supported by existing evidence. Our findings indicate that the conventional prior belief is supported by evidence mainly from developed countries but not from less developed countries.

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  • $\begingroup$ Thanks. Interesting, will take a deeper look to see how this was measured. $\endgroup$
    – Borut Flis
    Jul 30 at 7:37
  • $\begingroup$ Do you know of any studies with opposite findings? $\endgroup$
    – Borut Flis
    Jul 30 at 7:37
  • $\begingroup$ @BorutFlis I am not familiar with this area of research at all, I just used Google Scholar to find a metaanalysis paper. $\endgroup$
    – Giskard
    Jul 30 at 8:13

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