Optimum government size and economic growth in case of Indian states: Evidence from panel threshold model

The effect of government relative size on economic growth is a contentious issue. This paper is undertaken to test the relationship between government size and economic growth in Vietnam. The study is a panel data investigation, involving 60 provinces over the period 1997–2012. Various measures of government size are defined: provincial government expenditure as a share of gross provincial product (GPP), provincial government revenue as a share of GPP, real provincial government expenditure per capita, and real provincial government revenue per capita. Empirical estimates are employed by conducting Difference Generalized Method of Moments method proposed by Arellano and Bond (1991) and Pooled Mean-Group method by Pesaran, et al. (1999). These tests reveal: (i) provincial government expenditure (revenue) as a share of GPP has a significantly negative effect on economic growth; and (ii) the real government expenditure (revenue) per capita has a significantly positive effect on economic growth. It is also found that the long-run and short-run coefficients of government expenditure size are significant and negative, that the correction mechanism from the short run disequilibrium to the long run equilibrium is not convergent, and that government employment has a negative correlation with economic growth.

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Government Size and Economic Growth: Evidence from Selected OECD Countries

International Journal of Economics and Finance ◽

10.5539/ijef.v7n5p38 ◽

2015 ◽

Vol 7 (5) ◽

Author(s):

Alice Aleksandrovich ◽

Kamal P. Upadhyaya

Keyword(s):

Economic Growth ◽

Oecd Countries ◽

Government Size

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Innovation, institutions and economic growth in sub-Saharan Africa – an IV estimation of a panel threshold model

Journal of Economic and Administrative Sciences ◽

10.1108/jeas-11-2019-0127 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Joseph Ato Forson ◽

Rosemary Afrakomah Opoku ◽

Michael Owusu Appiah ◽

Evans Kyeremeh ◽

Ibrahim Anyass Ahmed ◽

...

Keyword(s):

Economic Growth ◽

Developing Economies ◽

Innovation Policy ◽

Threshold Model ◽

Sub Saharan Africa ◽

Content Type ◽

Panel Regressions ◽

Sub Saharan ◽

The Impact ◽

The Relationship

PurposeThe significant impact of innovation in stimulating economic growth cannot be overemphasized, more importantly from policy perspective. For this reason, the relationship between innovation and economic growth in developing economies such as the ones in Africa has remained topical. Yet, innovation as a concept is multi-dimensional and cannot be measured by just one single variable. With hindsight of the traditional measures of innovation in literature, we augment it with the number of scientific journals published in the region to enrich this discourse.Design/methodology/approachWe focus on an approach that explores innovation policy qualitatively from various policy documents of selected countries in the region from three policy perspectives (i.e. institutional framework, financing and diffusion and interaction). We further investigate whether innovation as perceived differently is important for economic growth in 25 economies in sub-Saharan Africa over the period 1990–2016. Instrumental variable estimation of a threshold regression is used to capture the contributions of innovation as a multi-dimensional concept on economic growth, while dealing with endogeneity between the regressors and error term.FindingsThe results from both traditional panel regressions and IV panel threshold regressions show a positive relationship between innovation and economic growth, although the impact seems negligible. Institutional quality dampens innovation among low-regime economies, and the relation is persistent regardless of when the focus is on aggregate or decomposed institutional factors. The impact of innovation on economic growth in most regressions is robust to different dimensions of innovation. Yet, the coefficients of the innovation variables in the two regimes are quite dissimilar. While most countries in the region have offered financial support in the form of budgetary allocations to strengthen institutions, barriers to the design and implementation of innovation policies may be responsible for the sluggish contribution of innovation to the growth pattern of the region.Originality/valueSegregating economies of Africa into two distinct regimes based on a threshold of investment in education as a share of GDP in order to understand the relationship between innovation and economic growth is quite novel. This lends credence to the fact that innovation as a multifaceted concept does not take place by chance – it is carefully planned. We have enriched the discourse of innovation and thus helped in deepening understanding on this contentious subject.

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Government Size and Economic Growth: A Review of International Literature

SAGE Open ◽

10.1177/2158244019877200 ◽

2019 ◽

Vol 9 (3) ◽

pp. 215824401987720 ◽

Cited By ~ 1

Author(s):

Sheilla Nyasha ◽

Nicholas M. Odhiambo

Keyword(s):

Economic Growth ◽

Causal Relationship ◽

Granger Causality ◽

Empirical Support ◽

Time Frame ◽

Government Size ◽

International Literature ◽

Data Set ◽

Clear Cut ◽

Study Methodology

In this article, we survey the existing literature on the causal relationship between government size and economic growth, highlighting the theoretical and empirical evidence from topical work. To our knowledge, this study may well be the first study of its kind to survey, in detail, the existing literature on the causal relationship between government size and economic growth—in all the countries, whether developing or developed. By and large, our study shows that direction of causality between these two variables has four possible outcomes, and that all the outcomes have found empirical support, based on variations in the country or region under study, methodology, proxies, data set used, and time frame considered. However, of the four, the most prominent is the second view, which validates unidirectional Granger-causality from economic growth to government size, followed by the bidirectional Granger-causality category. The study, therefore, concludes that the causal relationship between government size and economic growth is far from being clear-cut.

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