IESET.
Hypotheses·fiscal·government_spending_tfp_drag_panel

In a broad-country panel 1980-2019, a larger government expenditure share of GDP predicts lower subsequent total-factor-productivity (TFP) growth, controlling for initial income, trade openness, and human capital.

The directional claim is that a 10 percentage-point increase in government spending/GDP is associated with at least 0.3 percentage points lower annual TFP growth over the following decade, and that this relationship is monotonic across the observed spending range.

PARTIALengine/runs/government_spending_tfp_drag_panel

PARTIAL — coef=-0.001072, p=0.38 (above α=0.05); direction inconclusive

confidence cueThe result is useful, but not decisive. Treat it as a clue, not a settled conclusion.

policy briefMixed or noisy

In ordinary language

Over a long period, do more market-oriented institutions translate into higher income or productivity, once the comparison looks beyond a single success story?

plain answer

The evidence is suggestive but not decisive. coef=-0.001072, p=0.38 (above α=0.05); direction inconclusive

why it matters

This matters because fiscal claims should change belief only when they survive a pre-declared empirical test.

how the test works

It compares 106 country or place units from 1980 to 2019, using a panel fe design, with fixed effects for country and decade.

what was measured
What changed
  • Government spending share income
  • Government consumption share income
What we checked
  • Productivity growth annual
  • Labour productivity growth
what this does not prove

A single test is not the whole truth. It narrows the claim under a specific sample, time period, and method. Strong policy conclusions need the pattern to survive nearby tests, alternative data, and serious objections.

verification

9 input datasets, 0 unresolved missing series, provenance status: partial provenance.

Results

engine/runs/government_spending_tfp_drag_panel
1007550250198020002019USAGBRDEUFRAITAESPNLD
illustrative sketch · run pending
No coefficients yet. When the model fires, this chart will show tfp_growth_annual across 106 sampled countries over 1980–2019.
The shapes above are stylised — none of the lines are real data.
Placeholder for government_spending_tfp_drag_panel. Published chart will be generated from engine/runs/government_spending_tfp_drag_panel/chart_data.json.

Pre-registration

pre-registered
first-spec commit 91b4750 · 2026-05-03T09:44:53Z
run generated · 2026-06-29T17:52:23Z

In a broad-country panel 1980-2019, a larger government expenditure share of GDP predicts lower subsequent total-factor-productivity (TFP) growth, controlling for initial income, trade openness, and human capital. The directional claim is that a 10 percentage-point increase in government spending/GDP is associated with at least 0.3 percentage points lower annual TFP growth over the following decade, and that this relationship is monotonic across the observed spending range.

Falsification criterion — what would disprove this

set before the run · honoured after

This hypothesis is considered falsified if:

SUPPORTED if β1 (govt spending) is negative and significant at p<0.05 for both TFP growth and labour productivity growth. PARTIAL if negative and significant for TFP but not labour productivity. REFUTED if β1 is positive and significant at p<0.05. INFORMATIVE: excluding oil exporters should not eliminate the negative sign; if it does, the result is driven by resource rent endogeneity.

formal test & threshold
test:      panel_fe_govt_spending_tfp_drag_5yr
threshold: β_govt_spending (TFP growth) < 0 at p<=0.05  AND β_govt_spending (labour productivity) < 0 at p<=0.05  AND Ex-oil-exporter robustness retains negative sign.

Method

Template
panel_fe
Fixed effects
country, decade
Clustering
country
Sample
106 countries · 1980 – 2019
Evidence type
associational

Panel FE with non-overlapping 5-year averages to capture medium-run effects and reduce noise: TFP_growth = β0 + β1*govt_spending/GDP + controls + FE. Robustness: (1) exclude oil exporters where spending is endogenous to resource rents; (2) use Fraser EFW size-of-government sub-index instead of WDI spending; (3) subsample by income level; (4) 10-year forward growth to reduce reverse causality.

Data

VariableSourceTransform
tfp_growth_annual
outcome
pwt:rtfpnatier 3
log_diff_annual
labour_productivity_growth
outcome
pwt:rgdpo_per_emptier 3
log_diff_annual
government_spending_share_gdp
treatment
world_bank_wdi:GC.XPN.TOTL.GD.ZStier 2
level
government_consumption_share_gdp
treatment
world_bank_wdi:NE.CON.TOTL.ZStier 2
level
log_initial_gdp_per_capita
control
world_bank_wdi:NY.GDP.PCAP.KDtier 2
log
trade_openness
control
world_bank_wdi:NE.TRD.GNFS.ZStier 2
level
human_capital_index
control
pwt:hctier 3
level
investment_share_gdp
control
world_bank_wdi:NE.GDI.FTOT.ZStier 2
level
population_growth
control
world_bank_wdi:SP.POP.GROWtier 2
level

● ready  · ● pending  · ● reconstruct-needed

Detailed result card

Result card — government_spending_tfp_drag_panel

Verdict: PARTIAL — coef=-0.001072, p=0.38 (above α=0.05); direction inconclusive

Pre-registration

  • Claim: In a broad-country panel 1980-2019, a larger government expenditure share of GDP predicts lower subsequent total-factor-productivity (TFP) growth, controlling for initial income, trade openness, and human capital. The directional claim is that a 10 percentage-point increase in government spending/GDP is associated with at least 0.3 percentage points lower annual TFP growth over the following decade, and that this relationship is monotonic across the observed spending range.
  • Falsification rule: SUPPORTED if β1 (govt spending) is negative and significant at p<0.05 for both TFP growth and labour productivity growth. PARTIAL if negative and significant for TFP but not labour productivity. REFUTED if β1 is positive and significant at p<0.05. INFORMATIVE: excluding oil exporters should not eliminate the negative sign; if it does, the result is driven by resource rent endogeneity.
  • Falsification test: panel_fe_govt_spending_tfp_drag_5yr

Estimate

  • Method: linearmodels.PanelOLS
  • Coefficient (treatment): -0.001072
  • Std error: 0.00122
  • p-value: 0.38
  • Observations: 1584, countries: 59
  • Within R²: 0.607
  • Fixed effects: entity=True, time=False
  • Clustering: country

Variables resolved

  • pwt:rtfpna → tfp_growth_annual (outcome, publisher=pwt, n=6407)
  • pwt:rgdpo_per_emp → labour_productivity_growth (outcome, publisher=pwt, n=9529)
  • world_bank_wdi:GC.XPN.TOTL.GD.ZS → government_spending_share_gdp (treatment, publisher=world_bank_wdi, n=5156)
  • world_bank_wdi:NE.CON.TOTL.ZS → government_consumption_share_gdp (treatment, publisher=world_bank_wdi, n=8528)
  • world_bank_wdi:NY.GDP.PCAP.KD → log_initial_gdp_per_capita (controls, publisher=world_bank_wdi, n=12104)
  • world_bank_wdi:NE.TRD.GNFS.ZS → trade_openness (controls, publisher=world_bank_wdi, n=10714)
  • pwt:hc → human_capital_index (controls, publisher=pwt, n=8637)
  • world_bank_wdi:NE.GDI.FTOT.ZS → investment_share_gdp (controls, publisher=world_bank_wdi, n=9870)
  • world_bank_wdi:SP.POP.GROW → population_growth (controls, publisher=world_bank_wdi, n=16672)

Generated by scripts/run_panel_fe.py at 2026-06-29T17:52:23+00:00

Strongest opposing argument

Every hypothesis ships with its charitable opposing argument. The framework earns credibility by handling objections at their strongest, not weakest.

Authored framework. Read the transparency note.