Government size and economic growth in emerging market economies: a panel co-integration approach

Abstract

A significant positive influence of both government size and domestic investment on economic growth is found in the long run during 1970–2006 for a sample of 19 emerging market economies, employing panel co-integration testing and estimating the parameters using dynamic ordinary least square method, for all the indicators, excepting the case when one chooses general government final consumption expenditure as a percentage of GDP a measure of government size and gross capital formation as a percentage of GDP a measure of domestic investment, with per capita GDP a proxy for economic growth. The findings corroborate the argument that diverse results of the earlier studies are due to different measures adopted.

Keywords:

• government size
• economic growth
• emerging market economies
• panel co-integration
• dynamic OLS

Notes

1. The results having (i) individual effect as an exogenous variable and (ii) with no exogenous variable, are not reported in Table 4 and can be obtained after request.

2. The panel co-integration test for Model 1 and Model 3 are not reported here and can be made available from the author upon request.