IDEAS home Printed from https://ideas.repec.org/p/unp/wpaper/200302.html
   My bibliography  Save this paper

Economic Growth And Government Size In Indonesia: Some Lessons For The Local Authorities

Author

Listed:
  • Arief Ramayandi

    (Department of Economics, Padjadjaran University)

Abstract

The relationship between economic growth and government spending (the size of the government involvement in economic activity) is an interesting issue that has been a subject of controversy and debate. The direction of how government size associates with economic growth has so far been inconclusive. This paper attempts to examine the relationship between both variables for the case of Indonesia. The issue would be of interest for it provides room to examine the impact of government size on economic growth in the country. Furthermore, in the light of the undergoing process of fiscal decentralization in Indonesia, it also provides some lessons for the local authorities in the provincial and district level. To investigate the relationship, a sample of time series data from 1969 to 1999 on Indonesia is being used. The result of the econometric estimation suggests that economic growth is negatively associated with government size both in the long run and in the short run. Some possible explanations and interpretations on the finding are provided for this tendency of growth impeding nature of the relative government size in the economy. Then, some lessons for the local authorities in managing their own budget are being drawn as a note of cautions.

Suggested Citation

  • Arief Ramayandi, 2003. "Economic Growth And Government Size In Indonesia: Some Lessons For The Local Authorities," Working Papers in Economics and Development Studies (WoPEDS) 200302, Department of Economics, Padjadjaran University, revised Jul 2003.
    • Handle: RePEc:unp:wpaper:200302
    as

    Download full text from publisher

    File URL: http://ceds.feb.unpad.ac.id/wopeds/200302.pdf
    File Function: First version, 2003
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Alberto Alesina & Silvia Ardagna & Roberto Perotti & Fabio Schiantarelli, 2002. "Fiscal Policy, Profits, and Investment," American Economic Review, American Economic Association, vol. 92(3), pages 571-589, June.
    2. Folster, Stefan & Henrekson, Magnus, 1999. "Growth and the public sector: a critique of the critics," European Journal of Political Economy, Elsevier, vol. 15(2), pages 337-358, June.
    3. Ram, Rati, 1986. "Government Size and Economic Growth: A New Framework and Some Evidencefrom Cross-Section and Time-Series Data," American Economic Review, American Economic Association, vol. 76(1), pages 191-203, March.
    4. Agell, Jonas & Lindh, Thomas & Ohlsson, Henry, 1999. "Growth and the public sector: A reply," European Journal of Political Economy, Elsevier, vol. 15(2), pages 359-366, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shanaka Herath, 2009. "The Size of the Government and Economic Growth: An Empirical Study of Sri Lanka," SRE-Disc sre-disc-2009_08, Institute for Multilevel Governance and Development, Department of Socioeconomics, Vienna University of Economics and Business.
    2. Tao Kong & Arief Ramayandi, 2008. "Survey Of Recent Developments," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 44(1), pages 7-32.
    3. Intan Syahrini & Yusri Hazmi & Raja Masbar & Aliasuddin & Said Munzir, 2021. "Optimal Control Dynamic Relationships and Fiscal Policies in Indonesia’s Economy," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 34-51.
    4. anwar, saba & munir, kashif, 2013. "Size of the Government, Quality of Institutions and Growth in SAARC Countries," MPRA Paper 49524, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kalle Kukk, 2007. "Fiscal Policy Effects on Economic Growth: Short Run vs Long Run," Working Papers 167, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
    2. Facchini, François & Melki, Mickaël, 2013. "Efficient government size: France in the 20th century," European Journal of Political Economy, Elsevier, vol. 31(C), pages 1-14.
    3. Hrushikesh Mallick, 2008. "Government spending, trade openness and economic growth in India: A Time series analysis," Centre for Development Studies, Trivendrum Working Papers 403, Centre for Development Studies, Trivendrum, India.
    4. Peter Nijkamp & Jacques Poot, Victoria, 2002. "Meta-Analysis of the Impact of Fiscal Policies on Long-Run Growth," Tinbergen Institute Discussion Papers 02-028/3, Tinbergen Institute, revised 23 Apr 2003.
    5. Christoph Schaltegger & Benno Torgler, 2006. "Growth effects of public expenditure on the state and local level: evidence from a sample of rich governments," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1181-1192.
    6. Nijkamp, Peter & Poot, Jacques, 2004. "Meta-analysis of the effect of fiscal policies on long-run growth," European Journal of Political Economy, Elsevier, vol. 20(1), pages 91-124, March.
    7. Sefa Awaworyi Churchill & Mehmet Ugur & Siew Ling Yew, 2017. "Does Government Size Affect Per-Capita Income Growth? A Hierarchical Meta-Regression Analysis," The Economic Record, The Economic Society of Australia, vol. 93(300), pages 142-171, March.
    8. Peter Lindert, 2003. "Why The Welfare State Looks Like a Free Lunch," Working Papers 59, University of California, Davis, Department of Economics.
    9. Gebhard Kirchgässner, 2013. "Zur Rolle der Ökonometrie in der wissenschaftlichen Politikberatung," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 14(1-2), pages 3-30, February.
    10. R. Mohan, 2004. "Central finances in India: Alternative to procrustean fiscal correction," Centre for Development Studies, Trivendrum Working Papers 365, Centre for Development Studies, Trivendrum, India.
    11. repec:ebl:ecbull:v:8:y:2007:i:4:p:1-7 is not listed on IDEAS
    12. Nazila Alinaghi & W. Robert Reed, 2021. "Taxes and Economic Growth in OECD Countries: A Meta-analysis," Public Finance Review, , vol. 49(1), pages 3-40, January.
    13. James L. Butkiewicz & Halit Yanikkaya, 2011. "Institutions and the Impact of Government Spending on Growth," Journal of Applied Economics, Taylor & Francis Journals, vol. 14(2), pages 319-341, November.
    14. Pula Lekë & Elshani Alban, 2018. "Role of Public Expenditure in Economic Growth: Econometric Evidence from Kosovo 2002–2015," Baltic Journal of Real Estate Economics and Construction Management, Sciendo, vol. 6(1), pages 74-87, June.
    15. Facchini, François & Melki, Mickaël, 2013. "Efficient government size: France in the 20th century," European Journal of Political Economy, Elsevier, vol. 31(C), pages 1-14.
    16. Margit Schratzenstaller-Altzinger, 2007. "WIFO-Weißbuch: Wachstumsimpulse durch die öffentliche Hand," WIFO Monatsberichte (monthly reports), WIFO, vol. 80(6), pages 509-526, June.
    17. Mohammed Daher Alshammary & Norlin Khalid & Zulkefly Abdul Karim & Riayati Ahmad, 2022. "Government expenditures and economic growth in the MENA region: A dynamic heterogeneous panel estimation," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3287-3299, July.
    18. Athanasios Lapatinas & Alexandra Kyriakou & Antonios Garas, 2019. "Taxation and economic sophistication: Evidence from OECD countries," PLOS ONE, Public Library of Science, vol. 14(3), pages 1-21, March.
    19. Norman Gemmell, 2001. "Fiscal Policy in a Growth Framework," WIDER Working Paper Series DP2001-84, World Institute for Development Economic Research (UNU-WIDER).
    20. Richard Kneller & Norman Gemmell, 2002. "Fiscal Policy, Growth and Convergence in Europe," European Economy Group Working Papers 14, European Economy Group.
    21. Halkos, George & Paizanos, Epameinondas, 2015. "Fiscal policy and economic performance: A review of the theoretical and empirical literature," MPRA Paper 67737, University Library of Munich, Germany.

    More about this item

    Keywords

    economic growth; government spending;

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:unp:wpaper:200302. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Arief Anshory Yusuf (email available below). General contact details of provider: https://edirc.repec.org/data/lppadid.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.