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Government Expenditure and Economic Growth: Further Evidence from Cross-Country Analysis

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Abstract

This paper analyzes the relationship between economic growth and government expenditure growth by estimating an augmented GDP-growth equation on the basis of cross-country data, and using ordinary least squares (0LS) and random coefficient (RC) methods. The latter method yields both mean response coefficients, as in the case of the OLS method, as well as countryspecific coefficients. The relationship has been tested for two separate periods, i.e., 1965-80 and 1980-90. The estimates obtained using the RC method confirm existence of a positive relationship between government expenditure and economic growth, which is found to be stable across time periods, but unstable across different country groups. The observed differences between coefficients across country groups are attributable to structural as well as behavioral differences across countries.

Suggested Citation

  • Burney, Nadeem A. & Al-Mutairi, Naief, 2001. "Government Expenditure and Economic Growth: Further Evidence from Cross-Country Analysis," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 54(4), pages 435-475.
    • Handle: RePEc:ris:ecoint:0202
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    More about this item

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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