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An Investigation on the Relationship between Government Size and Unemployment Rate: Evidence from OECD Countries

Year 2011, Volume: 16 Issue: 16, - , 01.12.2011

Ahmet Aysu , Gökhan Dökmen

Abstract

It is widely accepted that size of government is an important determinant of labor market performance. Therefore, understanding the effects of government size on employment is both empirically and theoretically critical. Recent empirical studies indicate that the size of government is inversely related to labor market performance. This study examines the relationship between government size and unemployment rate for 17 OECD countries over the period of 1990-2007 using panel cointegration analysis. The empirical findings indicate a statistically significant relationship between size of government and unemployment rates.

Keywords

-

References

  • Abrams, B.A. (1999), “The Effect of Government Size on the Unemployment Rate”, Public Choice, 99(3–4), 395–401.
  • Blanchard, O. and J. Wolfers (2000), “The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence”, The Economic Journal, 110 (March): C1–C33.
  • Choi, I. (2001), “Unit Root Test for Panel Data”, Journal of International Money and Finance, 20(2), 249-272.
  • Christopoulos, D.K., E.G. Tsionas (2002), “Unemployment and Government Gize: Is there any Credible Causality?”, Applied Economics Letters, 9(12), 797–800.
  • Christopoulos, D.K., J. Loizides, E.G. Tsionas (2005), “The Abrams Curve of Government Size and Unemployment: Evidence from Panel Data”, Applied Economics, 37, 1193–99.
  • Daveri, F., G. Tabellini (2000), “Unemployment, Growth and Taxation in Industrial Countries”, Economic Policy, (30), 47–104.
  • Doménech, R. & JR. Garcia (2008), “Unemployment, Taxation and Public Expenditure in OECD Economies”, European Journal of Political Economy, 24, 202–217.
  • Feldmann, H. (2006), “Government Size and Unemployment: Evidence from Industrial Countries”, Public Choice, 127, 451–67.
  • Feldmann, H. (2010), “Government Size and Unemployment in Developing Countries”, Applied Economics Letters, 17, 289–292.
  • Im, K.S., M.H. Pesaran, Y. Shin (2003), “Testing for Unit Roots in Heterogeneous Panels”, Journal of Econometrics, 115, 53-63.
  • Kao, C. and M.H. Chiang (2000), “On The Estimation and Inference of a Cointegrated Regression in Panel Data”, Advances in Econometrics, 15, 179–222.
  • Karras, G. (1993), “Employment and Output Effects of Government Spending: Is Government Size Important?”, Economic Inquiry, 31(3), 354–369.
  • Levin, A., Chien-Fu Lin and J. Chia-Shang Chu (2002), “Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties”, Journal of Econometrics, 108, 1-24.
  • Maddala, G.S. and S. Wu (1999), “A Comparative Study of Unit Root Tests With Panel Data and A New Simple Test”, Oxford Bulletin of Economics and Statistics, Special Issue, 61, 631-652.
  • Nickell, S. and R. Layard (1999), “Labour Market Institutions and Economic Performance.” In Handbook of labour economics, vol. 3, ed. O. Ashenfelter and D. Card. Amsterdam: North Holland.
  • Nickell, S., L. Nunziata, W. Ochel (2005), “Unemployment in The OECD Since the 1960s. What do We Know?”, The Economic Journal, 115, 1–27.
  • OECD (2010), OECD Factbook 2009: Economic, Environmental and Social Statistics, 10 Eylül 2010, <http://www.sourceoecd.org>, 25.03.2011.
  • Pedroni, P. (1997), “Panel Cointegration; Asymptotic and Finite Sample Properties of Pooled Time Series Tests, with an Application To The PPP Hypothesis: New Results”, Indiana University Working Papers In Economics, April.
  • Pedroni, P. (1999), “Critical Values for Cointegration Test in Heterogeneous Panels with Multiple Regressors”, Oxford Bulletin of Economics and Statistics, Special Issue, 653- 670.
  • Pedroni, P. (2000), “Fully-Modified OLS for Heterogeneous Cointegrated Panels”, Advances in Econometrics, 15, 93-130.
  • Pedroni, P. (2004), “Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Test With an Application to the PPP Hypothesis”, Econometric Theory, 20, 597-625.
  • Siyan Wang and Burton A. A. (2007), “The Effect of Government Size on The Steady-State Unemployment Rate: A Structural Error Correction Model”, University Of Delaware Working Paper Series, Working Paper No. 2007-14.
  • Valentine, T. (2004), “Real Wages and Unemployment: State of the Debate”, Agenda, 11(4), 307-320.

An Investigation on the Relationship between Government Size and Unemployment Rate: Evidence from OECD Countries

Year 2011, Volume: 16 Issue: 16, - , 01.12.2011

Ahmet Aysu , Gökhan Dökmen

Abstract

It is widely accepted that size of government is an important determinant of labor market performance. Therefore, understanding the effects of government size on employment is both empirically and theoretically critical. Recent empirical studies indicate that the size of government is inversely related to labor market performance. This study examines the relationship between government size and unemployment rate for 17 OECD countries over the period of 1990-2007 using panel cointegration analysis. The empirical findings indicate a statistically significant relationship between size of government and unemployment rates.

Keywords

-

References

  • Abrams, B.A. (1999), “The Effect of Government Size on the Unemployment Rate”, Public Choice, 99(3–4), 395–401.
  • Blanchard, O. and J. Wolfers (2000), “The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence”, The Economic Journal, 110 (March): C1–C33.
  • Choi, I. (2001), “Unit Root Test for Panel Data”, Journal of International Money and Finance, 20(2), 249-272.
  • Christopoulos, D.K., E.G. Tsionas (2002), “Unemployment and Government Gize: Is there any Credible Causality?”, Applied Economics Letters, 9(12), 797–800.
  • Christopoulos, D.K., J. Loizides, E.G. Tsionas (2005), “The Abrams Curve of Government Size and Unemployment: Evidence from Panel Data”, Applied Economics, 37, 1193–99.
  • Daveri, F., G. Tabellini (2000), “Unemployment, Growth and Taxation in Industrial Countries”, Economic Policy, (30), 47–104.
  • Doménech, R. & JR. Garcia (2008), “Unemployment, Taxation and Public Expenditure in OECD Economies”, European Journal of Political Economy, 24, 202–217.
  • Feldmann, H. (2006), “Government Size and Unemployment: Evidence from Industrial Countries”, Public Choice, 127, 451–67.
  • Feldmann, H. (2010), “Government Size and Unemployment in Developing Countries”, Applied Economics Letters, 17, 289–292.
  • Im, K.S., M.H. Pesaran, Y. Shin (2003), “Testing for Unit Roots in Heterogeneous Panels”, Journal of Econometrics, 115, 53-63.
  • Kao, C. and M.H. Chiang (2000), “On The Estimation and Inference of a Cointegrated Regression in Panel Data”, Advances in Econometrics, 15, 179–222.
  • Karras, G. (1993), “Employment and Output Effects of Government Spending: Is Government Size Important?”, Economic Inquiry, 31(3), 354–369.
  • Levin, A., Chien-Fu Lin and J. Chia-Shang Chu (2002), “Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties”, Journal of Econometrics, 108, 1-24.
  • Maddala, G.S. and S. Wu (1999), “A Comparative Study of Unit Root Tests With Panel Data and A New Simple Test”, Oxford Bulletin of Economics and Statistics, Special Issue, 61, 631-652.
  • Nickell, S. and R. Layard (1999), “Labour Market Institutions and Economic Performance.” In Handbook of labour economics, vol. 3, ed. O. Ashenfelter and D. Card. Amsterdam: North Holland.
  • Nickell, S., L. Nunziata, W. Ochel (2005), “Unemployment in The OECD Since the 1960s. What do We Know?”, The Economic Journal, 115, 1–27.
  • OECD (2010), OECD Factbook 2009: Economic, Environmental and Social Statistics, 10 Eylül 2010, <http://www.sourceoecd.org>, 25.03.2011.
  • Pedroni, P. (1997), “Panel Cointegration; Asymptotic and Finite Sample Properties of Pooled Time Series Tests, with an Application To The PPP Hypothesis: New Results”, Indiana University Working Papers In Economics, April.
  • Pedroni, P. (1999), “Critical Values for Cointegration Test in Heterogeneous Panels with Multiple Regressors”, Oxford Bulletin of Economics and Statistics, Special Issue, 653- 670.
  • Pedroni, P. (2000), “Fully-Modified OLS for Heterogeneous Cointegrated Panels”, Advances in Econometrics, 15, 93-130.
  • Pedroni, P. (2004), “Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Test With an Application to the PPP Hypothesis”, Econometric Theory, 20, 597-625.
  • Siyan Wang and Burton A. A. (2007), “The Effect of Government Size on The Steady-State Unemployment Rate: A Structural Error Correction Model”, University Of Delaware Working Paper Series, Working Paper No. 2007-14.
  • Valentine, T. (2004), “Real Wages and Unemployment: State of the Debate”, Agenda, 11(4), 307-320.
There are 23 citations in total.

Details

Primary Language English
Journal Section Articles
Authors

Ahmet Aysu

Gökhan Dökmen This is me

Publication Date December 1, 2011
Submission Date December 12, 2014
Published in Issue Year 2011 Volume: 16 Issue: 16

Cite

APA Aysu, A., & Dökmen, G. (2011). An Investigation on the Relationship between Government Size and Unemployment Rate: Evidence from OECD Countries. Sosyoekonomi, 16(16). https://doi.org/10.17233/se.13014
AMA Aysu A, Dökmen G. An Investigation on the Relationship between Government Size and Unemployment Rate: Evidence from OECD Countries. Sosyoekonomi. October 2011;16(16). doi:10.17233/se.13014
Chicago Aysu, Ahmet, and Gökhan Dökmen. “An Investigation on the Relationship Between Government Size and Unemployment Rate: Evidence from OECD Countries”. Sosyoekonomi 16, no. 16 (October 2011). https://doi.org/10.17233/se.13014.
EndNote Aysu A, Dökmen G (October 1, 2011) An Investigation on the Relationship between Government Size and Unemployment Rate: Evidence from OECD Countries. Sosyoekonomi 16 16
IEEE A. Aysu and G. Dökmen, “An Investigation on the Relationship between Government Size and Unemployment Rate: Evidence from OECD Countries”, Sosyoekonomi, vol. 16, no. 16, 2011, doi: 10.17233/se.13014.
ISNAD Aysu, Ahmet - Dökmen, Gökhan. “An Investigation on the Relationship Between Government Size and Unemployment Rate: Evidence from OECD Countries”. Sosyoekonomi 16/16 (October 2011). https://doi.org/10.17233/se.13014.
JAMA Aysu A, Dökmen G. An Investigation on the Relationship between Government Size and Unemployment Rate: Evidence from OECD Countries. Sosyoekonomi. 2011;16. doi:10.17233/se.13014.
MLA Aysu, Ahmet and Gökhan Dökmen. “An Investigation on the Relationship Between Government Size and Unemployment Rate: Evidence from OECD Countries”. Sosyoekonomi, vol. 16, no. 16, 2011, doi:10.17233/se.13014.
Vancouver Aysu A, Dökmen G. An Investigation on the Relationship between Government Size and Unemployment Rate: Evidence from OECD Countries. Sosyoekonomi. 2011;16(16).
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