Public spending structure, minimal state and economic growth in France (1870-2010)

There is now a vast literature on the effects of the various functional components of public spending on growth. This contribution focuses on the effects of the composition of public spending on growth with reference to France for the period 1870-2010. Using a new database we show that the only functional component of expenditure that clearly contributes to the growth of French output is the expenditure which is aimed at the protection of property rights. Public interventions in support of the economy, on the other hand, have no impact on growth. In the area of social spending, only health expenditure contributes to output growth. In the case of France the empirical evidence therefore seems to confirm not only the crucial importance of the protection of property rights highlighted by neo-institutional theory, but also Smith's minimal state hypothesis: the restriction of the size of the state and the delimitation to its essential functions tends to favour output growth.