Can Latin America Prosper by Reducing the Size of Government
Year: 2009
Type: article
Abstract: This article examines the effect of government consumption on economic growth in 23 Latin American countries over the years 1974–2003. Employing the Armey Curve, we show that the typical Latin American government is spending beyond the optimal point. Using panel data and a fixed effects (FE) model, we find that increas-es in government consumption lead to unambiguous decreases in economic growth. An Overview An important policy goal of governments is to improve the eco-nomic well-being of their citizens. However, as can be seen in Figure 1, Latin America’s share in world output (GDP) dropped significant-ly during the 1980s. This decade has been called the “lost decade ” for Latin America, with per capita real income actually shrinking from 1980 to 1989. While the Latin America region has suffered from lack of econom-ic growth, other regions of the world have experienced economic growth, especially during the last 20 years. Figure 2 depicts the growth of East Asia’s share of world economic output and contrasts it
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2104704910