Place a bar on government size to bar growth reversal: fresh evidence from BARS curve hypothesis in Sub-Saharan Africa

Joshua Afolabi

Studies in Economics and Econometrics, 2023, vol. 47, issue 4, 303-320

Abstract: The theoretical and empirical links between optimum government size and economic growth have been widely debated in the economic literature, with the Barro-Armey-Rahn-Scully (BARS) curve positing a nonlinear nexus between the two variables. However, empirical evidence on the nonlinearity of the government size-economic growth nexus and the growth-maximizing government size, with specific focus on Sub-Saharan Africa, is scarce. This paper, therefore, tests the validity of the BARS curve and investigates the optimum government size needed to avert growth reversal across Sub-Saharan African income groups. The panel quantile regression model was adopted to estimate relevant data covering 2000–2020 obtained from reputable international databases. The results showed mixed findings but validated the postulation of the BARS curve in low-income and lower-middle income countries. The results are sensitive to the choice of government size indicator and vary across quantiles and income groups. In sum, the results showed that government size must be barred to a certain threshold to avert growth reversal. Therefore, fiscal policy instruments should be used circumspectly to ensure sustainable economic growth across Sub-Saharan African countries, irrespective of their income group.

Date: 2023
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DOI: 10.1080/03796205.2023.2220079

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