The impact of government size on economic growth: a threshold analysis

Stylianos Asimakopoulos and Yiannis Karavias

Discussion Papers from University of Nottingham, Granger Centre for Time Series Econometrics

Abstract: This paper examines the nature of the relationship between government size and economic growth and identifies the optimal level of government size through a novel and very general non-linear panel Generalized Method of Moments approach. Using a large panel dataset we uncover a statistically significant non-linear relationship via identifying the optimal threshold of government spending that maximizes growth. Furthermore, we show that the relationship between the two variables above and below that optimal level is statistically significant, even if we split our sample to developed and developing countries. Finally, we fi?nd an asymmetric impact of government size on economic growth in developed and developing countries around the estimated threshold.

Keywords: government size; economic growth; dynamic threshold estimation. (search for similar items in EconPapers)
Date: 2015-01
New Economics Papers: this item is included in nep-fdg, nep-gro, nep-mac and nep-pbe
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Citations: View citations in EconPapers (18)

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Journal Article: The impact of government size on economic growth: A threshold analysis (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:not:notgts:15/02

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