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Government size explains 42% of growth differences. What explains the other 58%?

Government size is strong but not the only factor. Key additional drivers: (1) Institutional quality — rule of law, regulatory efficiency, corruption control; (2) Development stage — poorer countries grow faster conditional on spending (beta-convergence); (3) Demographics and human capital — tertiary enrollment, life expectancy; (4) Economic structure and openness — trade openness, current account balance; (5) Capital formation rate — countries that invest more grow faster; (6) Macroeconomic stability — inflation drag on investment returns; (7) Terms-of-trade volatility — commodity-price risk exposure. The stepwise regression in the article shows capital formation and initial income as the two strongest residual predictors after spending is controlled.