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
>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:
"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
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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
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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
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