Displacement effects : the case of Greece

Abstract

In this paper, we tested the Displacement Effect Hypothesis for the case of Greece, in the Post World War II Period, using mainly the global dummy variables approach. The motive for the research was the resurgent debate among scientists and politicians concerning the large size of the public sector and its causes. To us, this development was mainly caused by certain exogenous distortions, which do not have sufficiently been analyzed in Greek literature. Two major disturbances were historically detected and subjected to statistical testing.

The results support the thesis of a permanent shift in government spending, i.e. the presence of a displacement effect, although not necessarily of the same magnitude.

Keywords:

• Displacement effects
• government expenditures
• time series