I’ve written about the negative relationship between government spending and economic performance, but most of my focus is on “macro” issues such as the overall diversion of resources from the productive sector to government.
This leads to the misallocation of labor and capital, I’ve explained, which means the economy isn’t as efficient and living standards stagnate.
But, with the exception of some posts about the harmful impact of unemployment insurance (including evidence that Paul Krugman and Larry Summers used to be on the right side before politics clouded their judgment), I’ve rarely explained this story from a “micro” perspective.
Fortunately, Professor Casey Mulligan of the University of Chicago has done some very solid work on this issue, some of which he recently wrote about in the New York Times.
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