Government Control and Economic Growth in Asia: Evidence from Time Series Data

Government control of the economy varies widely, in degree as well as effectiveness, across countries and continents. The LDCs of Asia have generally opted for planned development and a large public sector, giving their governments significant control over their economies. The Newly Industrialising Countries (NICs) of Asia, on die other hand, have thrived on economic liberalisation and greater market orientation. The growth record of the Asian LDCs during the past decade appears pitiful as compared to that of the high-growth NICs. The present study attempts to empirically reassess the nature of the government's linkage with growth and productivity in Asian LDCs. The study finds evidence of a significant linkage between government and growth in developing Asia, but not in die NICs or eight of die leading market economies of die world. Empirical evidence from the present study suggests that excessive government control in die Asian LDCs might have bred inefficiency, though not so much as to retard economic growth. On balance, governmental impact on these economies remains significantly positive.