Maybe rich countries just choose bigger governments. How do we know which way the arrow points?
Reverse causality is the strongest objection and deserves honest engagement. Three specific threats exist: (1) rich countries may choose larger welfare states as a luxury good; (2) aging populations drive both higher spending (pensions, healthcare) and lower growth; (3) recessions mechanically increase spending while reducing growth. However, the natural experiments — countries that cut spending and boomed (Canada 1995–2005, Sweden post-1993, Estonia post-1992, Ireland 1980s) versus countries that expanded and stagnated (France, Italy, Japan) — consistently point in the same direction. The relationship survives controls for income level and multiple time periods.