Is your government quietly making you poorer?
The World Bank data shows a negative correlation between government spending as a share of GDP and GDP growth rates across 113 countries. Countries with smaller governments tend to outgrow high-spending peers, with examples including Singapore and Bangladesh. This relationship suggests that there may not be a 'sweet spot' for government size as previously thought by economists.
- ▪Cross-country World Bank data shows a negative correlation between government spending and GDP growth rates.
- ▪Countries with smaller governments tend to outgrow high-spending peers.
- ▪The relationship between government spending and GDP growth rates fits a Power Law better than the traditional Quadratic Armey Curve.
Opening excerpt (first ~120 words) tap to expand
← All questions Is your government quietly making you poorer? Cross-country World Bank data consistently shows a negative correlation between government spending as a share of GDP and GDP growth rates. Countries with smaller governments (Singapore ~15%, Bangladesh ~9%) tend to outgrow high-spending peers. The relationship fits a Power Law better than the traditional Quadratic Armey Curve: R²=0.42 vs 0.39 across 113 countries in the 2005–2023 structural sample. Full analysis: The Fiscal Power Law — Armey Curve ← PreviousThe economic theory that gave politicians cover to spend more — and got the data wrong Next →Every economist says there's a 'sweet spot' for government size. The data says there isn't.
Excerpt limited to ~120 words for fair-use compliance. The full article is at Github.
