The aim of this paper is to analyze the impact of government spending on the privatesector, assessing the existence of crowding-out versus crowding-in effects. Using apanel of 145 countries from 1960 to 2007, the results suggest that government spendingproduces important crowding-out effects, by negatively affecting both privateconsumption and investment. Moreover, while the effects do not seem to depend on thedifferent phases of economic cycle, they vary considerably among regions. The resultsare economically and statistically significant, and robust to several econometrictechniques.
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