THE EFFECT OF GOVERNMENT SPENDING ON ECONOMIC GROWTH: TESTING THE NON‐LINEAR HYPOTHESIS
2012; Wiley; Volume: 66; Issue: 2 Linguagem: Inglês
10.1111/j.1467-8586.2012.00438.x
ISSN1467-8586
Autores Tópico(s)Local Government Finance and Decentralization
ResumoABSTRACT Theoretical models suggest a non‐linear relationship between government size and long‐run economic growth. However, testing this hypothesis empirically in cross‐country studies is complicated by the endogeneity of government spending and the accurate identification of inflexion points. This paper examines the non‐linear hypothesis by incorporating threshold analysis in a cross‐country growth regression. The methodology utilizes a sample‐splitting framework and follows an objective strategy for identifying and testing changes in the slope. The results provide evidence in support of the non‐linear hypothesis for a broad panel of countries.
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