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

Citation

Asimakopoulos S & Karavias Y (2016) The impact of government size on economic growth: a threshold analysis. Economics Letters, 139, pp. 65-68. https://doi.org/10.1016/j.econlet.2015.12.010

Abstract
We examine the nature of the relationship between government size and economic growth and identify the optimal level of government size using a large dataset through a novel and very general non-linear panel Generalized Method of Moments approach. We show that this relationship is statistically significant above and below the optimal level, even after splitting our sample to developed and developing countries. Finally, we find an asymmetric impact of government size on economic growth in both developed and developing countries around the estimated threshold.

Keywords
Government size; Economic growth; Dynamic threshold estimation

Journal
Economics Letters: Volume 139