Arguments that relate regimes to growth focus on property rights, pressures for immediate consumption, and the autonomy of dictators. While everyone seems to agree that secure property rights foster growth, it is controversial whether democracies or dictatorships better secure these rights. The main mechanism by which democracy is thought to hinder growth is pressure for immediate consumption, which reduces investment. Only states that are institutionally insulated from such pressures can resist them, and democratic states are not. The main argument against dictatorships is that authoritarian rulers have no interest in maximizing total output. These views are summarized in turn.

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Political Regimes and Economic Growth

The weak link between public spending in health and education, and health and education outcomes can be partially explained by the fact that the delivery of services that are critical to human development -- health, education, water and sanitation -- are widely failing poor people. The money is often spent on private goods or on the non-poor; it often fails to reach the frontline service provider; incentives for service delivery by providers are weak; and poor people sometimes fail to demand these services. This paper examines the experience with alternative mechanisms for service delivery -- contracting out to the private and NGO sectors, community participation, co-financing by service beneficiaries -- and shows that this, as well as the experience of more traditional public sector provision, can be interpreted by looking at three principal-agent relationships in the service-delivery chain: between policymakers and providers; between clients and providers; and between clients (as citizens) and policymakers. Weaknesses in one or more of these relationships can lead to service-delivery failure, while attempts to strengthen one may not always work because of deficiencies in other links in the chain. Copyright 2004, Oxford University Press.

Making Services Work for Poor People

According to official statistics, 20 percent of Uganda's total public expenditure was spent on education in the mid-1990s, most of it on primary education. One of the large public programs was a capitation grant to cover schools' nonwage expenditures. Using panel data from a unique survey of primary schools, we assess the extent to which the grant actually reached the intended end-user (schools). The survey data reveal that during 1991–1995, the schools, on average, received only 13 percent of the grants. Most schools received nothing. The bulk of the school grant was captured by local officials (and politicians). The data also reveal considerable variation in grants received across schools, suggesting that rather than being passive recipients of flows from the government, schools use their bargaining power to secure greater shares of funding. We find that schools in better-off communities managed to claim a higher share of their entitlements. As a result, actual education spending, in contrast to budget allocations, is regressive. Similar surveys in other African countries confirm that Uganda is not a special case.

Local Capture: Evidence from a Central Government Transfer Program in Uganda

A study of the impact of government size on economic performance and growth is important. Theoretically, one point of view suggests that a larger government size is likely to be detrimental to efficiency and economic growth because, for example, (i) government operations are often conducted inefficiently, (ii) the regulatory process imposes excessive burdens and costs on the economic system, and (iii) many of government's fiscal and monetary policies tend to distort economic incentives and lower the productivity of the system. At the other extreme, one can identify some points of view that assign to the government a critical role in the process of economic development, and could argue that a larger government size is likely to be a more powerful engine of economic development. There are several arguments on which the latter point of view is based. These include, besides others, (i) role of the government in harmonizing conflicts between private and social interests, (ii) prevention of exploitation of the country by foreigners, and (iii) securing an increase in productive investment and providing a socially optimal direction for growth and development.

https://www.jstor.org/stable/pdfplus/1804136.pdf

Government Size and Economic Growth: A New Framework and Some Evidence from Cross-Section and Time-Series Data

In a recent paper, Rati Ram (1986a) derived an equation for economic growth from two separate production functions, one for the government sector and the other for the nongovernment sector' Three different specifications of the growth equation were estimated using data for 115 countries covering the period 1960-80 International cross-section regressions for 1960-70 and 1970-80 as well as time-series regressions for individual countries were considered The following were the main results (Ram, 1986a, pp 191-92): (1) the overall impact of government size on growth is positive in almost all cases; (2) the (marginal) externality effect of government size is generally positive; (3) compared with the rest of the economy, factor productivity in the government sector appears to be higher, at least during the 1960s; and (4) there is a broad harmony between the estimates obtained from crosssection and time-series data From a policy standpoint, Ram's results, if widely accepted, have important implications, especially in regard to the economic development of the lowand middle-income developing countries For instance, the results can be interpreted to favor a relatively large role for governments in the economies of developing countries, especially if the factor productivity in the government sector is higher than in the nongovernntent sector The results of Ram, however, are in contrast to the findings of Daniel Landau (1986) Landau used a regression model within the framework of a pooled cross-section (65 LDCs) and time-series (1960-80) to assess the impact of a wide variety of government expenditure variables on the rate of economic growth The regressors included not only measures of government expenditure but also the level of per capita product, indicators of international economic conditions, human and physical capital variables, the structure of production, historical-political factors, geo-climatic factors, and others On the impact of government on economic growth, Landau's (1986, p 68) conclusions are: "Government consumption expenditure' excluding military and educational expenditure appears to have noticeably reduced economic growth Military and transfer expenditures do not appear to have had much impact on economic growth Governmental educational expenditures seem to be inefficient at generating actual education Government capital development expenditure appears to do nothing to accelerate economic growth" The conclusions of Ram and Landau are in sharp contrast to each other largely due to significant differences in their models and in the specification of government-size variables Ram's model has a better theoretical foundation compared to the multiple-regression approach of Landau On the other hand, Landau used a variety of government expenditure components as against aggregate government consumption which Ram used Their models and results, therefore, need to be carefully evaluated in further research on the subject This paper is an attempt in that direction and is aimed at a critical review of Ram's model and reexamination of his results *Department of Economics and Statistics, National University of Singapore, Kent Ridge, Singapore 0511 The author is grateful to Ganesha and Sai Gayathri for inspiration, to Koh Lin Ji for computing assistance, and to Basant Kapur, Tse Yiu Kuen, Dudley Luckett, and Mukul Asher for comments and advice Special thanks are due to the four referees of the Review for substantial comments on the earlier versions of this paper IRam adapted the two-sector growth model of Gershon Feder (1983) Feder examined the relationship between exports and economic growth

Government Size and Economic Growth: A New Framework and Some Evidence from Cross-Section and Time-Series Data: Comment

Adam Smith founded modern economics with a powerful argument that free markets are the best route to prosperity and economic growth. His conclusion has been studied and debated by economists ever since, including Nobel Prize winners Friedman, Hayek, Kuznets, Lewis, Myrdal, and Schultz. Whatever economists have concluded, since World War II the majority of the less developed countries seem to have opted for extensive government regulation of the private sector and for a large public sector. Has the large government role slowed or accelerated the growth of LDCs? Obviously, this is an important issue. This study looks at government expenditure, revenue raising, and regulation. Greater emphasis is put on expenditure because (1) the revenue raised is presumably a function of the level of expenditure, and (2) there are few internationally comparable measures of regulation. There are virtually no empirical studies of the general impact of government on economic growth. An extensive literature search turned up only three papers. Gemmell analyzed the impact of nonmarket sector growth on various measures of macroeconomic performance for 27 LDCs and developed countries for 1960 and 1970. He drew no general conclusions about the relation between the size of the nonmarket sector and economic growth.' Marsden found a negative relation between tax/GDP ratios and economic growth for a cross section of 20 LDCs and developed countries for the 1970-79 period.2 I found a negative relationship between the share of government consumption expenditure in GDP and the growth of per capita GDP for a cross section of 96 LDCs and developed countries over various time periods between 1961 and 1976.3 This paper extends the approach used in my 1983 article.

Government and Economic Growth in the Less Developed Countries: An Empirical Study for 1960-1980

These migration experiments prove not that all labor forces are equally skilled, but that these shortcomings of skill and so on in countries with poor educational systems are not even close to being sufficient to explain the gigantic differences in per capita income with richer countries. . . . I believe that the larger part of the story is the quality of the arrangements that the rich countries adopt. Poor countries are typically misgoverned, or are anarchies with no government at all, which is even worse. (M. Olson)

https://www.jstor.org/stable/10.1086/380823

A Simple Theory of Economic Growth

A major development in the analysis of government economic policies in the developed countries has been the rise of the public choice school. The essence of this approach is the application of the same basic assumptions that are used in the study of consumers and producers to political decision makers. In the public choice approach, decision makers in the public sector are assumed to be trying to maximize their personal benefits similarly to consumers and firms. Imputing utility maximizing behavior to public sector decision makers does not automatically lead to the conclusion that they will not act in the general interest; rather, whether they do or not becomes a question of the system of rewards and constraints they face. As Adam Smith demonstrated for firms, self-interested parties will act in the general interest if properly constrained and rewarded. However, the public choice approach does imply that public sector decision makers will act in the general interest only if the constraints and incentives on their behavior make serving the general interest also in their interest. It would appear that development economics, which is highly concerned with government policies, could benefit from the application of the public choice perspective. This article attempts to do this with respect to the effectiveness of economic aid in promoting economic growth. There is an extensive literature that discusses theoretically the effectiveness of aid and a more modest literature that attempts to estimate empirically the impact of aid on growth. The literature was recently surveyed by R. Riddell.' He surveys the views of the major proponents and critics of aid. Marxist critics of aid reject the market and the notion of a neutral state pursuing the general interest. There seem to be no studies of aid that adopt the public choice approach, which both accepts the efficiencies of the market as an instrument for economic growth and also assumes government officials are utility

Daniel Landau

Papers

Government and Economic Growth in the Less Developed Countries: An Empirical Study for 1960-1980

A Simple Theory of Economic Growth

Public Choice and Economic Aid