Iranian Journal of Economic Research

Government Size and Economic Growth in Iran: A Threshold Regression Approach

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

  • Receive Date 07 June 2016
  • First Publish Date 07 June 2016

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