Analysis of the Optimal Size of the Government Consumption

Abstract

The aim of this paper is to investigate the size of the government in 12 OECD countries. Data are gathered from Penn Tables. Clustered robust OLS estimation techniques have been used. Also Panel estimation techniques have been applied, FE and RE estimation. The functional form is quadratic is been used, to determine the point where the size of the government is optimal. Government consumption has been used as a proxy variable for government size.

Keywords: Government size, Clustered robust OLS, quadratic equation, Armey curve,Panel data, Fixed effect estimation, Random effects estimation, GLS , Pooled OLS

JEL Classification: E0, EO2, H0,C33, E62