Andrés, Javier; Doménech, Rafael; Fatás, Antonio - C.E.P.R. Discussion Papers - 2004
the volatility of output. In the model, however, we find that the stabilizing effect is only due to a composition effect … and it is not present when we look at the volatility of private output. Given that empirically we also observe a negative … correlation between government size and the volatility of consumption, we modify the model by introducing rule-of-thumb consumers …