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Is there a link between government spending, good governance, and economic growth? Evidence from developing countries

Author

Listed:
  • Karima Habibi

    (University of Tunis, ESSECT, DEFI)

  • Salwa Trabelsi

    (University of Tunis, ESSECT, DEFI)

Abstract

This paper examines whether government spending and governance have a nonlinear relationship with economic growth. The study determines the threshold effect of the institutional quality on the relationship between public expenditure and economic performance for developing countries using the Dynamic Panel Threshold Kink Model (DPTKM) (Seo et al., 2019) from 1996 to 2020. This approach differs from other studies by analyzing the interplay of good governance under different regimes considering the double endogeneity of the threshold variables and the regressors. The results confirm that public spending favors growth only beyond a certain level for which the institutional quality is good.

Suggested Citation

  • Karima Habibi & Salwa Trabelsi, 2024. "Is there a link between government spending, good governance, and economic growth? Evidence from developing countries," Economics Bulletin, AccessEcon, vol. 44(2), pages 515-527.
  • Handle: RePEc:ebl:ecbull:eb-24-00047
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Economic growth; Government expenditure; Governance; dynamic Panel threshold kink model;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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