 The impact of government expenditure on economic growth: How sensitive to the level of development?Shih-Ying Wu (), Jenn-Hong Tang and Eric Lin Journal of Policy Modeling, 2010, vol. 32, issue 6, 804-817 Abstract: Previous studies generally find mixed empirical evidence on the relationship between government spending and economic growth. In this paper, we re-examine the causal relationship between government expenditure and economic growth by conducting the panel Granger causality test recently developed by (Hurlin, 2004) and (Hurlin, 2005) and by utilizing a richer panel data set which includes 182 countries that cover the period from 1950 to 2004. Our empirical results strongly support both Wagner's law and the hypothesis that government spending is helpful to economic growth regardless of how we measure the government size and economic growth. When the countries are disaggregated by income levels and the degree of corruption, our results also confirm the bi-directional causality between government activities and economic growth for the different subsamples of countries, with the exception of the low-income countries. It is suggested that the distinct feature of the low-income countries is likely owing to their inefficient governments and inferior institutions. Keywords: Government; size; Economic; growth; Wagner'; s; law; Panel; Granger; causality (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:32:y::i:6:p:804-817 Access Statistics for this article Journal of Policy Modeling is currently edited by A. M. Costa More articles in Journal of Policy Modeling from Elsevier |
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