Department of Economics and Business Economics

Legitimacy and the Cost of Government

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

  • Niclas Berggren, Research Institute of Industrial Economics (IFN) and University of Economics in Prague, Sweden
  • Christian Bjørnskov
  • David Lipka, Anglo-American University, Czech Republic
While previous research documents a negative relationship between government size and economic growth, suggesting an economic cost of big government, a given government size generally affects growth differently in different countries. As a possible explanation of this differential effect, we explore whether government legitimacy (measured by satisfaction with the way democracy works) influences how a certain government size affects growth. On the positive side, a government perceived as legitimate may “get away” with being big since legitimacy can affect behavioral response to, and therefore the economic growth cost of, taxation and government expenditures. On the negative side, perceived legitimacy may make voters less prone to acquire information, which in turn facilitates interest-group oriented or populist policies that harm growth. A panel-data analysis of up to 30 developed countries, in which two different measures of the size of government are interacted with government legitimacy, reveals that perceived legitimacy exacerbates a negative growth effect of government size in the long run. This could be interpreted as governments taking advantage of being regarded as legitimate in order to secure short-term support at a long-term cost to the economy.
Original languageEnglish
JournalPublic Choice
Volume162
Issue3-4
Pages (from-to)307-328
ISSN0048-5829
DOIs
Publication statusPublished - 2015

Bibliographical note

Campus adgang til artiklen / Campus access to the article

    Research areas

  • Legitimacy, Economic growth, Size of government, Confidence, Trust

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