Public sector and economic growth: the Greek experience

Over the past two decades there has been an increase in the relative size of the public sector, accompanied by a decline in the growth performance of the Greek economy. In an attempt to highlight the contribution of the government size to growth, an analytical framework is developed, incorporating the possibility that marginal factor productivities are not equal in the public and private sectors. Econometric analysis utilizing this framework points to a negative relationship between government size and economic growth. This seems to derive, in part, from intersectoral diseconomies generated by the growing share of deft-financed government activities.