Abstract:
This paper investigates the impact of government size on economic growth in selected economies of the MENA countries, by using a non-linear panel data approach over the period 1990-2011. The estimation results of Panel Smooth Threshold Regression model show that when the level of government consumption is very large, the positive impact of labor force on growth is intensified. On the other hand, export revenues in the countries under investigation have no positive effect on economic growth when the level of government consumption is high. The main result of this study confirms the negative impact of consumption expenditures on economic growth in this block of countries.
Machine summary:
An Investigation of the Impact of Government Size on Economic Growth: New Evidence from Selected MENA Countries Rana Asghari Economics, Faculty of Economic and Management, Urmia University, Urmia, Iran asghari.
The estimation results of Panel Smooth Threshold Regression model show that when the level of government consumption is very large, the positive impact of labor force on growth is intensified.
Therefore, this paper provides a new evidence about the impacts of government size on economic growth, using production function utilized by Dar and AmirKhalkhali (2002).
More specifically, we examine the validity of positive or negative impacts of government consumption expenditure on growth by using a Panel Smooth Threshold Regression (PSTR) model.
Armey (1995) implements the Laffer curve to present the nonlinear relationship between government size and economic growth that empirically confirmed by Sheehey (1993), Vedder and Gallaway (1998), and Chen and Lee (2005), then introduces inverted U-shape Armey curve.
According to suggestion of result of linearity test, one number of transition functions will be sufficient to assess the non-linearity between government size and economic growth.
The other results confirm that when the government consumption is high, the impact of investment would be in indirect relationship with economic growth in first regime.
Using a Panel Smooth Threshold Regression model, this research investigates the non-linearity between government size and economic growth.
On the other hand,the investment has positive impact on economic growth when the level of government consumption size is low.