The relationship between government size and growth has received an enormous attention in the economics literature, and the
recent financial crisis has forced this topic back on the agenda. A highly controversial debate in this respect is whether
large governments are harmful for growth. Endogenous growth theory provides us with the view that tax structure and the composition
of public expenditure may be important for growth, perhaps even more than total tax or expenditure levels. Government size
and structure are, however, also reflected in the level and structure of market regulations, which may substitute or complement
fiscal intervention. The study provides an overview of the growth-friendliness of fiscal and regulatory structures in a cross-section
of EU 15 and EU 12 countries and highly developed OECD countries. Peripheral European (transition) countries are also included,
whenever respective data are available. Our analysis is based on several measures capturing the expenditure and the tax side
of the budgets, as well as regulatory policies. It is shown that the size and the structure of fiscal and regulatory regimes
and, hence, the expected long-run growth impact of government activities, still differ markedly across countries.
Forschungsbereich:Makroökonomie und öffentliche Finanzen