The optimal government size: Further international evidence on the productivity of government services

This paper estimates the optimal government size for several sets of economies try investigating the role of public services in the production process. I assume government services are optimally provided when their marginal product equals unity (the ''Barro rule''). The empirical results suggest: (1) government services are significantly productive; (2) they are overprovided in Africa, underprovided in Asia, and optimally provided everywhere else; (3) the optimal government size is 23 percent for the average country but ranges From 14 percent for the average OECD country to 33 percent in South America; and (4) the marginal productivity of government services is negatively related to government size.