Productivity of public expenditure and optimal government size: The case of the chilean regions
Keywords:
public expenditure, productivity of public expenditure, optimal government sizeAbstract
The understanding of the structure and behavior of the government, in the economy, strengthen and guide benign public policies for economic and social well-being. For this, in this paper the optimal, size of government for the economics of the chilean regional governments is estimated through the methodology employed by Karras (1996). The results show the existence of productive public spending in the Chilean regions and consider that in the case of regions with greater economic development, public spending is under-provided and in regions with less economic development, over-provisioned. The optimal national size of government for regional economies is 4.84% and, specifically, 5.8% for regions with greater economic development and 4.0% for regions with less economic development. In this context, an inverse relationship was found between the productivity of public spending and the size of government for regions with greater economic development. The size of the Chilean regional governments is below the estimated optimal level, with the exception of two regions. Therefore, for regions that do not reach the optimum, there is room for an increase in public spending in a benign way for economic growth.
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