Authors

• Farhad Dejpasand ¹
• Hosein Goudarzi ²

¹ Assistant Professor, Shahid Beheshti University

² Economist, The Iranian Foreign Investment Company

Abstract

A great deal of literature has examined the relationship between government size and economic growth. To investigate this relationship, this study applies a threshold regression model to test whether the Army curve exists in Iran as an oil exporting country. Five classification of government size include total government expenditure/GDP, government investment expenditure/GDP and government consumption expenditure/GDP, government expenditure financed by oil /GDP and government expenditure financed by tax/GDP. The result reveal that all classification except government expenditure finance by tax have a threshold effect and economic growth is maximum when government expenditure is between 23 to 30 percent of GDP.
 

Keywords

• Government Size
• Economic Growth
• Armey curve