This paper examines the relationship between government expenditure and taxation and economic growth in rich countries, using a panel data approach covering the period 1970-1995. The authors address several econometric issues, including simultaneity problems, endogenous selection of tax policy, and the selection of a sample of rich countries. They find that a 10 percentage point increase in government expenditure as a share of GDP is associated with a decrease in the growth rate by 0.7-0.8 percentage points. The results are robust even according to the stringent extreme bounds criterion, suggesting a robust negative relationship between government expenditure and economic growth in rich countries. When the sample is extended to non-OECD countries, both government expenditure and taxation are found to be negatively associated with economic growth.This paper examines the relationship between government expenditure and taxation and economic growth in rich countries, using a panel data approach covering the period 1970-1995. The authors address several econometric issues, including simultaneity problems, endogenous selection of tax policy, and the selection of a sample of rich countries. They find that a 10 percentage point increase in government expenditure as a share of GDP is associated with a decrease in the growth rate by 0.7-0.8 percentage points. The results are robust even according to the stringent extreme bounds criterion, suggesting a robust negative relationship between government expenditure and economic growth in rich countries. When the sample is extended to non-OECD countries, both government expenditure and taxation are found to be negatively associated with economic growth.