Estimating the Effects of Government Size, Interventions, and Other Regulations on Labor Productivity

Abstract

This paper estimates the effect of government size, interventions, and other regulations on labor productivity using a stepwise Ordinary Least Squares (OLS) regression. Several specifications of the model were tested using Fixed Effects. Three primary cases were analysed namely, the case for all the 97 selected countries, the case for OECD countries, and the case for ASEAN countries. The results show that: (1) In the case of 97 countries estimation, Regulatory Trade Barriers (negative) and Government Consumption (positive) had the biggest impact on labor productivity; (2) In OECD estimates, Tariffs and Regulatory Trade Barriers had the biggest (positive) impact on labor productivity; While (3) In the ASEAN estimates, Government Consumption (positive), Business Regulations (negative), and Tariffs (positive) had the biggest impact on Labor Productivity.

Keywords: OLS regression, ASEAN, government size, government interventions, government regulations, labor productivity, trade barriers

JEL Classification: H00, H40, H41