Han Huang wrote:
>I did some number crunching. Using the G7 economic data, I ran a
>covariance analysis on Matlab and my least mean squares estimate
>showed:
>
>1% GDP more spending
> --> 0.35% higher unemployment
> --> -$196 purchasing power per capita
>
>1% GDP more taxation
> --> 0.44% higher unemployment
> --> -$334 purchasing power per capita (before taxes)
>...
>Observe that the more socialist a nation is, the higher its
>unemployment rate, and in general the less wealthy it is.
There is a big literature which compares countries trying to infer what makes them differ in wealth, etc. You'd really do better to track that literature down, than to throw together an OLS from 8 data points. Here is an example of a related paper, that I happened to have in my mail inbox:
http://nberws.nber.org/papers/W6727
"The Quality of Government"
BY: RAFAEL LA PORTA
Harvard University
FLORENCIO LOPEZ-DE-SILANES
Harvard University
Department of Economics
ANDREI SHLEIFER
Harvard University
ROBERT VISHNY
University of Chicago
Paper ID: National Bureau of Economic Research Working Paper No.
6727
Contact: RAFAEL LA PORTA
Email: Mailto:laporta@nber.org
Postal: Harvard University
Littauer Building, #114
Cambridge, MA 02138 USA
Phone: (617)868-3900
Fax: (617)868-2742
Co-Auth: FLORENCIO LOPEZ-DE-SILANES
Department of Economics
110 Littauer Center
Cambridge, MA 02138 USA
Co-Auth: ANDREI SHLEIFER
M9 Littauer Center
Cambridge, MA 02138 USA
Co-Auth: ROBERT VISHNY
1101 East 58th Street
Chicago, IL 60637 USA
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ABSTRACT:
We investigate empirically the determinants of the quality of
governments in a large cross-section of countries. We assess
government performance using measures of government
intervention, public sector efficiency, public good provision,
size of government, and political freedom. We find that
countries that are poor, close to the equator,
ethnolinguistically heterogeneous, use French or socialist laws,
or have high proportions of Catholics or Muslims exhibit
inferior government performance. We also find that the larger
governments tend to be the better performing ones. The
importance of historical factors in explaining the variation in
government performance across countries sheds light on the
economic, political, and cultural theories of institutions.
JEL Classification: H11, N40, P50
Robin Hanson
hanson@econ.berkeley.edu http://hanson.berkeley.edu/ RWJF Health Policy Scholar FAX: 510-643-8614 140 Warren Hall, UC Berkeley, CA 94720-7360 510-643-1884