Evaluation the Impact of Government Size on Economic Growth: A Comparison of Developed and Developing Countries

Abstract

Due to the importance of the government size impact on economic growth, the current study investigates the impact of government size on economic growth in economies of the developed and developing countries by using a panel data approach over the period 1990-2010. The results indicate that government size has positive effect on economic growth and negative effect on per capita production growth in developed countries, but, it has negative and significant effect on economic growth and per capita production growth in developing countries. Therefore, reducing the government size is very important for increasing the economic growth in developing countries such as Iran. Also, based on the results, investment growth and consumption expenditure growth have positive and significant effect on economic growth and per capita production growth in both developed and developing countries. However, Trade openness effect on economic growth and per capita production growth is positive and significant in developed countries, but is negative in developing countries.