efficiency. Specifically, while a larger size of government is bad for incentives when one ignores efficiency, the results change …, larger public sectors are bad for incentives. By contrast, when efficiency exceeds size, larger public sectors are not bad … government share in GDP; and as a measure of government efficiency, we construct an index by following the methodology of Afonso …

In this paper, foreign aid transfers can distort individual incentives, and hence hurt growth, by encouraging rent …