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

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  • Akram, Vaseem
  • Rath, Badri Narayan

Abstract

This paper investigates the relationship between optimum government size and economic growth using data of Indian states during 1990-91 to 2017–18. Our results derived from panel threshold regression model show a positive and significant impact of government size on economic growth within the estimated thresholds for both aggregate and sub-panels based on income and regions. Once the government size moves above the upper threshold level, then its impact declines and turns to be insignificant. Thus, our findings suggest the policymakers for maintaining the government size within the thresholds limit.

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  • Akram, Vaseem & Rath, Badri Narayan, 2020. "Optimum government size and economic growth in case of Indian states: Evidence from panel threshold model," Economic Modelling, Elsevier, vol. 88(C), pages 151-162.
    • Handle: RePEc:eee:ecmode:v:88:y:2020:i:c:p:151-162
    DOI: 10.1016/j.econmod.2019.09.015
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    More about this item

    Keywords

    Economic growth; Optimum government size; Panel threshold regression; Indian states;
    All these keywords.

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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