Does Government Size Affect Per-Capita Income Growth? A Hierarchical Meta-Regression Analysis

41 Pages Posted: 22 Nov 2015

See all articles by Sefa Awaworyi Churchill

Sefa Awaworyi Churchill

RMIT University - School of Economics, Finance and Marketing

Mehmet Ugur

University of Greenwich

Siew Ling Yew

Monash University

Multiple version iconThere are 2 versions of this paper

Date Written: November 21, 2015

Abstract

We conduct a hierarchical meta-regression analysis to review 87 empirical studies that report 769 estimates for the effects of government size on economic growth. We follow best-practice recommendations for meta-analysis of economics research, and address issues of publication selection bias and heterogeneity. When size is measured as the ratio of total government expenditures to GDP, the partial correlation between government size and per-capita GDP growth is negative in developed countries, but insignificant in developing countries. When size is measured as the ratio of consumption expenditures to GDP, the partial correlation is negative in both developed and developing countries, but the effect in developing countries is less adverse. We also report that government size is associated with less adverse effects when primary studies control for endogeneity and are published in journals and more recently, but it is associated with more adverse effects when primary studies use cross-section data. Our findings indicate that the relationship between government size and per-capita GDP growth is context-specific and likely to be biased due to endogeneity between the level of per-capita income and government expenditures.

Keywords: Economic growth, Government size, Government expenditure, Government consumption, Meta-analysis, Evidence synthesis

JEL Classification: O40, H50, C1

Suggested Citation

Awaworyi Churchill, Sefa and Ugur, Mehmet and Yew, Siew Ling, Does Government Size Affect Per-Capita Income Growth? A Hierarchical Meta-Regression Analysis (November 21, 2015). Available at SSRN: https://ssrn.com/abstract=2693940 or http://dx.doi.org/10.2139/ssrn.2693940

Sefa Awaworyi Churchill (Contact Author)

RMIT University - School of Economics, Finance and Marketing ( email )

Building 80
445 Swanston Street
Melbourne, Victoria 3000
Australia

Mehmet Ugur

University of Greenwich ( email )

30 Park Row
Greenwich
London, SE10 9LS
United Kingdom

Siew Ling Yew

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

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