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Government size and automatic stabilizers: international and intranational evidence

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This paper studies the role of automatic stabilizers using a sample of OECD countries and US states. We find that there is a strong and robust negative correlation between measures of government size and the volatility of output. This correlation is robust to the inclusion of a large set of controls as well as to alternative methods of detrending and estimation. The economic significabce of this relationship is larger for the US states.

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en

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application/pdf

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http://flora.insead.edu/fichiersti_wp/inseadwp1999/99-50.pdf

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Copyright INSEAD. All rights reserved