Federal, State, And Local Governments: Evaluating Their Separate Roles In US Growth

The authors use US county level data (3,058 observations) from 1970 to 1998 to explore the relationship between economic growth and the extent of government employment at three levels: federal, state and local. The authors find that increases in federal, state and local government employments are all negatively associated with economic growth. They find no evidence that government is more efficient at more decentralized levels. While they cannot separate out the productive and redistributive services of government, they document that the county-level income distribution became slightly wider from 1970 to 1998.