The Size of the Government and Economic Growth: An Empirical Study of Sri Lanka

Shanaka Herath

SRE-Disc from Institute for Multilevel Governance and Development, Department of Socioeconomics, Vienna University of Economics and Business

Abstract: The new growth theory establishes, among other things, that government expenditure can manipulate economic growth of a country. This study attempts to explain whether government expenditure increases or decreases economic growth in the context of Sri Lanka. Results obtained applying an analytical framework based on time series and second degree polynomial regressions are generally consistent with previous findings: government expenditure and economic growth are positively correlated; excessive government expenditure is negatively correlated with economic growth; and an open economy promotes growth. In a separate section, the paper examines ArmeyÂ’s (1995) idea of a quadratic curve that explains the level of government expenditure in an economy and the corresponding level of economic growth. The findings confirm the possibility of constructing the Armey curve for Sri Lanka, and it estimates the optimal level of government expenditure to be approximately 27 per cent. This paper adds to the literature indicating that the Armey curve is a reality not only for developed economies, but also for developing economies.

Keywords: government expenditure; economic growth; time series regression; polynomial regression; Armey curve (search for similar items in EconPapers)
JEL-codes: C32 F43 H50 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www-sre.wu.ac.at/sre-disc/sre-disc-2010_05.pdf (application/pdf)

Related works:
Working Paper: The Size of the Government and Economic Growth: An Empirical Study of Sri Lanka (2010)
Working Paper: The Size of the Government and Economic Growth: An Empirical Study of Sri Lanka (2009)
Working Paper: The Size of the Government and Economic Growth. An Empirical Study of Sri Lanka (2009)
Working Paper: The Size of the Government and Economic Growth: An Empirical Study of Sri Lanka (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wiw:wiwsre:sre-disc-2010_05

Access Statistics for this paper

More papers in SRE-Disc from Institute for Multilevel Governance and Development, Department of Socioeconomics, Vienna University of Economics and Business Welthandelsplatz 1, 1020 Vienna, Austria.
Bibliographic data for series maintained by Gunther Maier ().