Dan Mitchell, our man in DC, has used up a lot of electrons rubbishing the OECD but this week he found a paper which says some things in favour of not so big government. This post is packed with information on the negative effects of big spending by governments. The bottom line for Dan:
Larger governments are associated with lower long-term growth. Larger governments also slowdown the catch-up to the productivity frontier.
Governments in the OECD spend on average about 40% of GDP on the provision of public goods, services and transfers. The sheer size of the public sector has prompted a large amount of research on the link between the size of government and economic growth. …This paper investigates empirically the effect of the size and the composition of public spending on long-term growth… The main findings that emerge from the analysis are…Larger governments are associated with lower long-term growth. Larger governments also slowdown the catch-up to the productivity frontier.
Scanning the abstract and some of the comments I am not as keen as Dan, I think the authors are far too friendly towards redistribution.