Public Choice

, Volume 127, Issue 3–4, pp 443–459 | Cite as

Government Size and Unemployment: Evidence from Industrial Countries



Using data from 19 industrial countries for the period 1985 to 2002, this paper analyzes how the size of the government sector affects unemployment. Controlling for the impact of the business cycle as well as for the impact of all major labor market institutions and unobserved country effects, we find that a large government sector is likely to increase unemployment. It appears to have a particularly detrimental effect on women and the low skilled and to substantially increase long-term unemployment. It seems that dominant stateowned enterprises, a large share of public investment in total investment as well as high top marginal income tax rates and low income threshold levels at which they apply are particularly detrimental.


Unemployment Rate Economic Freedom Employment Protection Legislation Labor Market Institution Active Labor Market Policy 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© Springer Science+Business Media, Inc. 2006

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of TübingenTübingenGermany

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