This paper estimates the optimal government size for several sets of economies by investigating the role of public services in the production process. The author assumes government services are optimally provided when their marginal product equals unity (the 'Barro rule'). The empirical results...

Using data from sixty-six economies, the authors examine (1) the substitutability between private consumption and military and nonmilitary government spending and (2) the severity of liquidity constraints. Although the estimated substitutability parameters are fragile, private consumption and...

The effects of government spending on employment and output may depend on government size and the persistence of spending. The empirical results suggest that permanent (or persistent) changes in government consumption have a greater impact on output and employment than temporary (or cyclical)...