Evaluation the Impact of Government Size on Economic Growth: A Comparison of Developed and Developing Countries

Document Type : Research Article

Authors

1 Department of Tourism Economics, Iranian Academic Center for Education, Culture and Research(ACECR), Mashhad, Iran

2 Department of Economics, University of Sistan and Baluchestan, Zahedan, Iran

3 University of Sistan and Baluchestan, Zahedan, Iran

Abstract

Due to the importance of the government size impact on economic growth, the current study investigates the impact of government size on economic growth in economies of the developed and developing countries by using a panel data approach over the period 1990-2010. The results indicate that government size has positive effect on economic growth and negative effect on per capita production growth in developed countries, but, it has negative and significant effect on economic growth and per capita production growth in developing countries. Therefore, reducing the government size is very important for increasing the economic growth in developing countries such as Iran. Also, based on the results, investment growth and consumption expenditure growth have positive and significant effect on economic growth and per capita production growth in both developed and developing countries. However, Trade openness effect on economic growth and per capita production growth is positive and significant in developed countries, but is negative in developing countries.

Keywords

References

Afonso, A. and Jalles, J.T. (2011). Economic performance and government size. Working Paper Series. European Central Bank. NO. 1399.
Aisen, A. and Veiga, F. (2011). How DoesPolitical Instability Affect EconomicGrowth?”, IMF Working Paper, No. 11/12,1-28.
Alexiou, C. (2009). Government Spending and Economic Growth: Econometric Evidence from the South Eastern Europe (SEE). Journal of Economic and Social Research. 11(1): 1-16.
Altunc, O.F., and Aydin, C. (2013), The relationship between optimal size ofgovernment and economic growth: Empirical evidence from Turkey. Romania and Bulgaria, Social and Behavioral Sciences, 92, 66-75.
Asghari, R., Heidari, H., and Mohseni Zonouzi, S. (2014). An Investigation of the Impact of Government Size on Economic Growth: New Evidence from Selected MENA Countries. Iranian Journal of Economic Studies, 3(2), 63-80. doi: 10.22099/ijes.2014.3670.
Asimakopoulos, S., and Karavias, I. (2016). The impact of government size on economic growth: a threshold analysis. DOI: 10.1016/j.econlet.2015.12.010.
Bagdigen, M., and Hakan, C. (2008). Causality between public expenditure an economic growth. The Turkish case. Journal of Economic and Social Research, 6(1): 53-72.
Baltagi, B. (2005). Econometric Analysis of Panel Data. John Wiley & Sons Ltd.
Bergh, A., and Henrekson, M. (2011). Government Size and Growth: A Survey and Interpretation of the Evidence, Research Institute of Industrial Economics,12(2).
Chen, S.T. Chen, C.C. and Kim, Y. (2011). Economic Growth and Government Size in OECD Countries: New Evidence from the Quantile Regression Approach. Economics Bulletin. 31(1): 416-425.
Choi, I. (2001). Unit root tests for panel data. Journal of International Money and Finance 20: 249–272.
Dezhpasand. F., and Godarzi, H. (2010). Government size and economic growth in Iran; Threshold regression method. Iranian economic research, 13 (42): 189-207. (in Persian).
Feder, G. (1982). On Exports and Economic Growth. Journal of Development Economics. 12: 59-73.
Folster, S., and Henrekson, M. (2001). Growth Effect of Government Expenditure and Taxation in Rich Countries. European Economic Review. 45(8): 1501-1520.
Forte, F., Magazzino, C. (2016), Government size and economic growthin Italy: A time series analysis. European Scientific Journal, 12(7), 149-169.
Grossman, P. (1988). Growth in Government and Economic Growth: the Australian Experience. Australian Economics Papers. 27: 33-45.
Hadri, K. (2000). Testing for stationarity in heterogeneous panel data. Econometrics Journal 3: 148–161.
Heydari, H., Parvin, S., and Fazeli. M. (2010). The Relationship Between Government Size and Economic Growth: A Case Study of the OPEC Member Countries on the Persian Gulf. Journal of Quantitative Economics (Journal of Economic Studies). 7 (3): 43-66. (in Persian).
Higgins, M., Young, A., and Levy, D. (2006). Federal state and local government evaluating their separate roles in US growth. MPRA Paper No. 1014.
Im, K.S., Pesaran, M.H., and Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics. 115: 53–74.
Jafari Samimi. A and Azarmand, H.(2005). The Relationship between Economic Liberalization and Macroeconomic Performance in the Countries of the World (1980-2001). Journal of Commerce, 37: 41-61. (in Persian).
Komeyjani. A. and Nazari, R. (2009). The Effect of Government Size on Economic Growth in Iran. Economic research, 9 (3): 1-28. (in Persian).
Levin, A. Lin, C.F., and Chu, C.S. (2002). Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics, 108: 1–24.
Naderi, M and Oghli.A.(2007). A Theoretical and Empirical Study of the Impact of the Conditions of Economic Freedom on the Economic Growth of Countries. Journal of Economic Research, 32, 1-29. (in Persian).
Niloy, B., Haque, M., and Osborn, D.R. (2003). Public Expenditure and Economic Growth: A Disaggregated Analysis for Developing Countries. Centre for Growth and Business Cycle Research. School of Economic Studies. University of Manchester. Manchester. UK. http://www.ses.man.ac.uk/cgbcr/DPCGBCR/dpcgbcr30.pdf
Piraee K, and Noroozi (2012).H. Testing the Armey Curve Relationship between Government Size and Economic Growth in Iran A threshold Regression Approach. QJER. 12 (2) :1-22.
Ram, R. (1986). Government Size and Economic Growth: A New Framework and Some Evidence from Cross-Section and Time-Series Data.” The American Economic Review 76(1): 191-203.
Ramyandi, A. (2003). Economic growth and government size in Indonesia. Working Paper in Economics and Development Studies. Department of Economics.
Razmi, A.A., Shahraki, S. (2009). The Effect of Economic Freedom on Economic Growth with an Institutional Approach, Journal of Science and Development, No. 28, 128-155. (in Persian)
Romero de Avila, D. Strauch, R. (2003). Public Finances and Long-term Growth in Europe – evidence from a panel data analysis. Working Paper Series. No 246. European Central Bank.
Sadeghi. S.K., Montazeri, J., and Dehghani, A. (2011). The Effect of Government Size on Economic Growth in Low Income Countries. Economic modeling, 5(13): 91-107. (in Persian).
Sayadzadeh, A., Jafari Samimi, A., and Karimi, S. (2007). Investigating the Relationship Between Government Size and Economic Growth in Iran: Estimation of Army Curve. Peyk Noor. Economics and Accounting: 95-112. (in Persian).
Environmental Energy and Economic Research
Volume 2, Issue 3
August 2018
Pages 177-185

Files

Share

How to cite

Statistics