THE EFFECT OF GOVERNMENT SPENDING ON ECONOMIC GROWTH: TESTING THE NON-LINEAR HYPOTHESIS
Tamoya Christie
Bulletin of Economic Research, 2014, vol. 66, issue 2, 183-204
Abstract:
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Theoretical models suggest a non-linear relationship between government size and long-run economic growth. However, testing this hypothesis empirically in cross-country studies is complicated by the endogeneity of government spending and the accurate identification of inflexion points. This paper examines the non-linear hypothesis by incorporating threshold analysis in a cross-country growth regression. The methodology utilizes a sample-splitting framework and follows an objective strategy for identifying and testing changes in the slope. The results provide evidence in support of the non-linear hypothesis for a broad panel of countries.
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:bla:buecrs:v:66:y:2014:i:2:p:183-204
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