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Two dimensions of the intensity of interparty rivalry are used to test the hypothesis that greater interparty competition enhances government efficiency. Using data from a set of 14 large Indian state governments between 1957 and 2018, we find confirmation for two political rivalry hypotheses. The first is that the ex-post size of the first versus second place seat share winning margin is a useful metric of the (in)effectiveness of rival party policing of incumbent spending behavior. The second is the hypothesis that excessive spending by the incumbent governing party is decreased by the expectation of greater election contestability and that contestability is related to the expected effective number of competing parties (ENPSeats) nonmonotonically. Our analysis suggests that contestability across Indian States reaches a maximum when the incumbent faces an expectation of ENPSeats that is closer to 5 than to Duverger's 2. [ABSTRACT FROM AUTHOR]

Empirical growth literature finds conflicting results on the relationship between public spending and long-run economic growth. This paper shows that the nature of relationship between the two variables depends upon the institutional quality of a country. Our empirical investigation relies upon OLS, fixed-effects and system-GMM estimators for a large panel of 113 developed and developing economies during the period 1981–2015. The main findings confirm that the adverse impact of public size on output growth holds only for countries with poor institutional quality. By contrast, when the institutional quality exceeds certain thresholds, the growth inhibiting effects of government size become insignificant. From the fiscal policy viewpoint, these outcomes imply that the productivity of public spending is more important than an excessively large public size of the country. [ABSTRACT FROM AUTHOR]

This article documents the determinants of local government size corresponding with the work experience of political leader. Utilizing the city level data on the size of government and political officials in China, government size is found to be negatively associated with local political leaders' work experience in business. This relationship holds more firmly in poor cities or those with stronger fiscal decentralization. Moreover, we find evidence supporting that both fiscal decentralization and the size of public funded system contribute to the expansion of government. [ABSTRACT FROM AUTHOR]

Governments implemented fiscal stimulus packages to alleviate the global financial crisis of 2007–2009. Using annual data from 1996 to 2019, we investigate economic growth in a large sample of countries for pre-and post-Global Financial Crisis years. Our approach analyzes the interaction between institutional quality and government size (government expenditures as share of GDP), reinforced by threshold estimations. We document that economies react to government size depending on the quality of the institutions in question. First, fixed effects models indicate higher institutional quality has positive effects on growth, while government size—and its interactions with institutional quality—has negative effects. Second, the coefficients of government size on economic growth are negative with higher institutional quality and become larger in the post-Global Financial Crisis years. These combined results indicate that higher-quality institutions make economies less tolerant of rising government expenditures than lower-quality institutions. Our main findings support institutional quality as the channel through which fiscal policy has real effects. The evidence herein is robust to measures of institutional quality from different databases. [ABSTRACT FROM AUTHOR]

The theoretical and empirical links between optimum government size and economic growth have been widely debated in the economic literature, with the Barro-Armey-Rahn-Scully (BARS) curve positing a nonlinear nexus between the two variables. However, empirical evidence on the nonlinearity of the government size-economic growth nexus and the growth-maximizing government size, with specific focus on Sub-Saharan Africa, is scarce. This paper, therefore, tests the validity of the BARS curve and investigates the optimum government size needed to avert growth reversal across Sub-Saharan African income groups. The panel quantile regression model was adopted to estimate relevant data covering 2000–2020 obtained from reputable international databases. The results showed mixed findings but validated the postulation of the BARS curve in low-income and lower-middle income countries. The results are sensitive to the choice of government size indicator and vary across quantiles and income groups. In sum, the results showed that government size must be barred to a certain threshold to avert growth reversal. Therefore, fiscal policy instruments should be used circumspectly to ensure sustainable economic growth across Sub-Saharan African countries, irrespective of their income group. [ABSTRACT FROM AUTHOR]

This study aims to examine the factors that affect the level of disclosure of local government financial reports. This paper uses such independent variables as budget expenditure of the local government, government size, and capital expenditure. The financial records of Indonesian local governments that have undergone audit by the supreme agency are analyzed in this study. For the 2020 timeframe, 485 local/city governments in Indonesia served as the research samples, and purposive sampling was employed as the sampling method. SPSS is utilized to support multiple linear regression, which is the data analysis method used in this study. The test findings revealed that budget expenditure (β = 0.274; p < 0.05), government size (β = 0.216; p < 0.05), and capital expenditure (β = 0.178; p < 0.05) have a significant effect on the level of local government financial statements disclosure. It is envisaged that the findings of this study would enable local governments, particularly districts or cities, to better maximize the disclosure of local government financial statements in compliance with government regulation. Local governments will be able to open up information that is easily accessible with the aid of ever-improving technology.

Inspired by the Look East Policy, Malaysia aims to learn from such a successful Asian country as South Korea in order to break through its upper-middle-income trap. Using the dynamic threshold nonlinear approach, this comparative study is therefore timely to compare and contrast the nonlinear correlation between economic growth and government spending between these two nations. When considering two different measures of government size as the threshold variable, namely government operating/real GDP (GS1) and government investment/real GDP (GS2), the practical findings of this research indicate the presence of a threshold effect between government size and economic growth in the contexts of Malaysia and South Korea. Specifically, the BARS curve exists in Malaysia and South Korea when GS1 is set as the threshold variable. However, a U-shaped curve of nonlinear relationship exists in both countries when GS2 serves as the threshold variable. Interestingly, the threshold two-regime regression results show that while government operating expenditures in both Malaysia and South Korea are not found to be overspent and are beneficial for economic growth, the Malaysian government's investment expenditure has not achieved the full potential of accelerating economic growth compared to South Korea.

The study examines the impact of fiscal decentralization on Ethiopia’s Subnational (Regional) economic growth. The study followed a quantitative research procedure employing data from 2008 to 2021. The units of analysis in the study are Ethiopia’s sub-national governments (SNGs). The study used the two-step System General Method of Moments (GMM) of dynamic panel estimation because it resolves concerns such as endogeneity and heteroscedasticity. The study’s findings revealed that expenditure, revenue, and composite decentralization have a statistically significant negative effect on regional economic growth. Moreover, among the control variables, inflation and government size have a statistically significant detrimental effect on regional economic growth. However, human capital has no significant effect. Ethiopia’s fiscal decentralization contradicts the goals and theoretical underpinnings of fiscal federalism. This may be because fiscal decentralization and economic activities function within an ethnically based federalism framework. The primary implication is that the federal government needs to reevaluate the transfer of fiscal authority to SNGs. Transforming tax policy into a robust institutional mechanism for economic growth is vital. The revenue and spending sides of intergovernmental relations also need to be closely related. As opposed to prior studies, which utilized one or two fiscal decentralization indicators, this study used multiple indicators, making the study more thorough and closing the knowledge gap.

This research aims to determine the influence of expenditure variations, government size, and fiscal distress on the information content in the financial reporting of local governments. The study was conducted on 23 local governments in Aceh, using multiple linear regression analysis with SPSS 25. The data were extracted from audited financial reports of local governments for the period 2017-2021. The results indicate that, in the simultaneous test, expenditure variations, local government size, and fiscal distress collectively affect information content. Partially, in the first model, fiscal distress has a positive impact, but expenditure variations and local government size do not affect the information content variable (surplus/deficit difference in LO and LRA). In the second model, expenditure variations have a negative impact, local government size has a positive impact, but fiscal distress does not affect the information content variable (income difference in LRA and LO). In the third model, local government size has a negative impact on the information content variable (expense difference in LO and expenditure in LRA), but expenditure variations and fiscal distress do not affect the information content variable (expense difference in LO and expenditure in LRA). [ABSTRACT FROM AUTHOR]

Numerous studies have pointed out that as the political and economic environment changes, the structures of corruption in China are constantly evolving. Specifically, the transaction-type corruption has surged and the auto-corruption (non-transactional administrative corruption) has receded. As such, what kind of structural characteristics does China's corruption types present today? What factors can help us explain the variances of these structural characteristics? Drawn on the quantitative analysis of a novel dataset, this study found that: in terms of personal traits, the gender of the defendant and urban–rural residence have a significant impact on the type of corruption; in the macro-institutional environment, the development of private economy and the size of the government have opposite effects on the composition of the corruption type. Privatization increases the probability of transaction-type corruption. The size of the government increases the probability of auto-corruption. [ABSTRACT FROM AUTHOR]

Corruption and the fight against its various forms have constantly been a concern of theorists and policymakers because corruption is one of the important obstacles to socio-economic development. Economists have issued warnings about the devastating consequences of financial corruption and have argued that financial corruption increases transaction costs, reduces investment incentives, and ultimately reduces economic growth. Political scientists have pointed out the political costs of corruption for societies and claimed that an increase in corruption leads to a decrease in public trust in the political system and the destruction of the government's legitimacy, and could have a negative impact on democracy and political development. The manner in which this phenomenon influences growth and development is that it typically leads to more inequality and loss of public trust in government. By reducing political accountability, it undermines democracy and good governance. The economic approach is useful to study the causes of financial corruption because the researchers will be able to pay close attention to the underlying motivations and rationality to explain this problem of corruption. The researchers will be able to explain and understand why some individuals make choices based on their preferences that results in financial corruption. Some individuals are more corruption-prone and willing to engage in corruption when the opportunity arises to maximize financial gains for their own personal use or act as agents of corruption in their institutional roles for collective gains. Equally important is the task of discussing the anti-corruption efforts to deter future corruption behaviors of individuals and to combat state-sponsored institutional corrupt practices. In order to formulate effective strategies and policies to win the fight against corruption, it is necessary to first identify and understand the causes of corruption. With a qualitative approach and within the framework of public choice theory, the authors analyze a collection of the most important empirical and theoretical work on the causes of corruption with the goal of finding suitable answers to the following research questions: 1. What are the prominent differences between economic and non-economic approaches to explain the causes of financial corruption? 2. Does the economic approach used to explain the causes of financial corruption have more explanatory power than the non-economic approaches? The research hypothesis assumes that the use of economic approaches (general choice theory) to study financial corruption is more effective in analyzing the financial corruption-development association. The essence of the general choice theory to explain the behaviors of individuals and political elites is that these individuals seek to maximize their own personal gains and/or the collective benefits of a particular group, party, class and family with no or little regard for the maximization of the accrued benefits for the society at large. A key question is, to what extent the corrupt individuals are rational actors, given that they make choices which are generally perceived as irrational by other individuals—who do not get involved in corrupt practices. A multitude of reasons might influence an individual to make a ‘rational’ decision to engage in financial corruption practices. Theoretically, he makes a rational choice, because his calculations indicate that the expected benefit of financial corruption exceeds the expected cost including the cost of being detected, arrested and punished for his illicit acts. The critics of the economic approach to explain financial corruption emphasize a score of economic and non-economic factors such as weak economic development, low levels of education, poor quality of the bureaucracy, reduced transparency in laws and tax regulations, misconduct of community leaders, and religious composition of the total population. The existence of ethnic-linguistic subgroups in a country, the low degree of democracy (indicated particularly by the lack of freedom of speech and the freedom of the press), and political instability have been emphasized in the non-economic approach to the study of financial corruption. However, the effects of the non-economic causes of financial corruption are indirectly through economic factors. The individuals generally base their decisionmaking on their cost-benefit analyses and if the gains exceed the cost, they get engage in corruption. In other words, the improved quality of bureaucracy and transparency do not necessarily prevent a person from committing acts of financial corruption, but the high quality of bureaucracy and the high degree of democracy (particularly freedom of the press and transparency) reduce financial corruption by increasing the cost of corruption behaviors. The results suggest that non-economic approaches have been useful in explaining causes and consequences of corruption to a certain degree, but economic approach is more effective for understanding the motivations of corruption and its consequences for economic and political development. These research findings are important for planning and implementing anti-corruption programs such as enforceable ethical code of conduct, and regulations to increase transparency and accountability for public officials. [ABSTRACT FROM AUTHOR]

AbstractThe purpose of this paper is to identify the driving elements of the South African financial sector. While South Africa’s financial sector appears robust, there exists a dearth of empirical research investigating the determinants of its development. Thus, this work assesses how three critical factors: natural resource abundance (NR), IT infrastructure, and government expenditure levels affect financial development (FD) in South Africa using annual data from 1971 to 2020. Preliminary findings show that the series are integrated, and they are cointegrated. Results from regression analysis suggest that the abundance of NR does not significantly contribute to financial development in South Africa. Conversely, advanced IT infrastructure, larger government size, and openness to trade are associated with a more developed financial sector. The implications of these findings are essential for policymakers and stakeholders in understanding the factors that drive financial development in South Africa. The study recommends that, among others, innovative approaches are needed to channel gains from natural resources effectively into the financial sector.

The ongoing discussion regarding the role of the free market economy and the extent of state intervention is a critical subject in economics. This matter holds special significance for transition economies, as it presents both challenges and opportunities in such contexts. One may perceive the degree of trade openness as a path toward welfare societies. However, the dual impacts of trade openness on an economy, namely, the compensation and efficiency hypotheses, must be considered. The compensation hypothesis proposes that global trade can enhance the economic influence of the state, whereas the efficiency hypothesis advocates for a contraction in the state's economic undertakings. This study focuses on interpreting this complex scenario, specifically in the context of the European Union's transition economies. The aim of this research is to uncover how the economic magnitude of a nation influences trade liberalization, and consequently the free market economy, in Central and East European (CCE) countries, using public choice theory as a foundation. The research delves into the causal relationship between trade openness and government size in eleven CCE countries—Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, the Slovak Republic, and Slovenia. The period covered in this study ranges from 1996 to 2021. The methodological tool utilized for this investigation is the Kónya bootstrap Granger causality test, which accommodates cross-sectional dependence and country-specific variances. The novelty of this study lies in its application of both the compensation and efficiency hypotheses to the context of 11 transition economies in the Central and Eastern European (CCE) region. The results from the Granger causality test demonstrate a unidirectional positive correlation between trade openness and the size of the government for Bulgaria, Croatia, Czechia, and Estonia. On the contrary, Slovenia exhibited a unidirectional negative correlation. These findings confirm the applicability of the compensation hypothesis in Bulgaria, Croatia, Czechia, and Estonia, while supporting the efficiency hypothesis in Slovenia. [ABSTRACT FROM AUTHOR]

This paper adds to research on the international drivers of corruption and anti‐corruption by focusing on the influence of regional trade agreements (RTAs). Using cross‐national data and employing a social network analysis, we provide descriptions of the evolution of deep integration of RTAs' network in anti‐corruption and transparency with a comprehensive view in which we utilise the network's Closeness, Harmonic, Betweenness, Eigenvector, and PageRank centralities to demonstrate the positions of member countries. We examine the relations of the positions of member countries in the deep RTAs' network and the performance of those countries in fighting corruption. Our empirical results suggest that the countries which hold dominant positions in the deep RTAs' network may be associated with better performance in fighting corruption. At the same time, countries which may have traditionally lagged in the enforcement of anti‐bribery and corruption laws will benefit through the transfer of best practices and technical expertise in rulemaking and enforcement by using their positions in the deep RTAs' network. Furthermore, our results indicate that the provisions related to anti‐corruption or transparency in RTAs will play more important roles in fighting public sector corruption for member countries. The findings are robust to alternate corruption and governance measures. [ABSTRACT FROM AUTHOR]

This paper provides new insights into the growth-maximizing size of government in Turkey. Unlike previous studies that traditionally use the share of government spending in GDP as a proxy variable of government size, in this paper we consider a fairly large number of proxy variables ranging from the share of tax revenues in GDP to the share of public investment in total investment. After reviewing the potential non-linear relationship between government size and growth, we estimate various thresholds for government size that maximize growth. To this end, we use the threshold autoregressive model proposed by Hansen (1996: 413-430; 2000: 575-603)) and apply it to Turkey's annual time-series data for the period from 1974 to 2019. Overall, we arrive at the following main result: Government size is non-linearly related to growth, confirming the existence of a growth-maximizing threshold for any measure of government size, beyond which growth tends to slow down as government size continues to increase. More precisely, the results show that the estimated thresholds for government size lie within the range of 4.28–15.19%, depending on the definition or proxy variable representing government size. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to identify the driving elements of the South African financial sector. While South Africa's financial sector appears robust, there exists a dearth of empirical research investigating the determinants of its development. Thus, this work assesses how three critical factors: natural resource abundance (NR), IT infrastructure, and government expenditure levels affect financial development (FD) in South Africa using annual data from 1971 to 2020. Preliminary findings show that the series are integrated, and they are cointegrated. Results from regression analysis suggest that the abundance of NR does not significantly contribute to financial development in South Africa. Conversely, advanced IT infrastructure, larger government size, and openness to trade are associated with a more developed financial sector. The implications of these findings are essential for policymakers and stakeholders in understanding the factors that drive financial development in South Africa. The study recommends that, among others, innovative approaches are needed to channel gains from natural resources effectively into the financial sector. [ABSTRACT FROM AUTHOR]

Does trade openness systematically imply bigger governments, as proposed by Rodrik (Journal of Political Economy, 106, 997 and 1998)? This paper presents a novel and more refined explanation for when and why international trade may enlarge the public sector. We propose that trade openness is associated with bigger governments via the compensation pathway if i$$ (i) $$ the price volatility of a country's export basket is substantial andii$$ (ii) $$ the country is democratic. The first condition satisfies the prior that trade openness introduces uncertainty and external risk. The second condition ensures that the people's desire for greater economic security can be realised through government spending. Empirical evidence for 137 countries, that account for approximately 95% of world population, from 2000–2016 is consistent with this hypothesis. Exploring areas of public spending, we find intuitive patterns. Consistent with the compensation hypothesis, government spending on economic affairs and housing increases significantly with trade openness, whereas spending on education, health care, and the military is not affected. As with our general result, this is only the case in democracies that are subject to high price volatility on the global market. [ABSTRACT FROM AUTHOR]

This paper empirically investigates how government consumption impacts upon economic growth in Tanzania for the period 1967 – 2020. Autoregressive Distributed Lag (ARDL) bounds cointegration test revealed economic growth and government expenditure were cointegrated, given the conditioning factors; and, revealed a small but statistically significant positive long run effect of government size on economic growth. The pairwise Granger causality test rejected the null hypothesis of no uni-directional or bi-directional causality between the government size and economic growth. The study also established the long run effect of inflation on economic growth was negative and statistically significant. The ECM results reveal the short run effect of government size on economic growth was negative and statistically insignificant; and, the effect of private investment on economic growth was positive and statistically insignificant. Besides, the short run effect of human capital on economic growth was negative and weakly significant. The results revealed a high speed of adjustment from disequilibrium to long run equilibrium. The findings support the conventional view: government consumption lacks significant positive effect on growth over the long run. This finding reveals the limit to the use of fiscal policy especially recourse to government expenditure to prime or stabilize the economy as maintained in Keynesian macroeconomic theory. The gestation period of government consumption is long. Furthermore, the finding underscore importance of price stability and, other things being constant, need for more proactive policies and strategies to avail business and macroeconomic environment that would increase private investment. [ABSTRACT FROM AUTHOR]

Introduction: Although the use of the happiness economy approach does not have much history, since policy makers generally make decisions in the direction of increasing well-being and public satisfaction, it becomes important to quantify the concept of mental well-being and examine the factors affecting it in order to improve happiness in society. Methods: The purpose of this research is to investigate the effect of government size on people's happiness in two different regimes according to the level of human development in 110 selected countries for the period of 2006 to 2017. For this purpose, threshold panel regression has been used. The information needed for this research includes the happiness variable from the World Happiness Information Bank, economic growth rate, unemployment rate, inflation rate and government size from the World Bank database and human development index from the United Nations Development Program. Findings: The model estimation results show that the variables of government size, economic growth, inflation and unemployment have a significant effect on happiness. According to the threshold limit calculated for the human development variable (0.577), the effect of government size on happiness is different in two regimes. Discussion: According to the findings of the research, increasing the size of the government below the threshold of human development leads to a decrease in the happiness of the people of the society, but after crossing the threshold of human development with the increase in the size of the government, the happiness of the people increases, which shows the efficiency of the government policies. Also, with the increase in economic growth, happiness increases and with the increase in inflation and unemployment, happiness decreases, and the noteworthy point is that the negative effect of unemployment is greater than the negative effect of inflation.

Investigating the effects of government size on brain drain as an important factor in the process of development and growth of countries has a decisive role and various aspects and areas in developing countries have always been affected by this category. Accordingly, one of the most important goals of economic planners is to reduce the size of the government in order to prevent the migration of elites in different societies. On the other hand, countries with large levels of government are witnessing brain drain and the migration of their talents. In this study, we intend to examine the effects of government size on brain drain during the years 2002-2018 and based on data from official economic statistics centers such as World Bank data and immigration data in developing countries. The econometric method used is the Generalized Method of Moment. The results show that the first stop of brain drain and the size of government have a positive effect on brain drain in developing countries and social welfare, political stability, health and public health have a negative effect on brain drain. Based on the results of the research, it is suggested that the decision-makers in the developing countries, in applying their policies and enacting their laws and defending the support schemes of the elites and entrepreneurs and creating a platform for growth and progress for the country's elites based on a meritocracy and deserve more attention. And this work will not be realized unless the size of the government is reduced and, in a better sense, improved. Based on the results of the research, it is suggested that the size of the government should be reduced in order to increase social welfare and lay the groundwork to prevent the departure of elites.

What lessons does prior research on causes of corruption offer public administrators operating in, and researchers studying the dynamics of, public sectors of most governments developing societies? In this paper we summarize a voluminous body of prior economic, social and political science research that tells us about the roots of corruption in public sector of developing countries. Informing the analysis is a "review of reviews" of a sprawling research that examines six indicators: government size, oil revenue, democracy, quality of bureaucracy, rule of law, and human development; that are assumed to be major factors in increasing or decreasing the level of corruption in developing societies. We discern from this formidable body of research what is known about causes of corruption, what is left to know, and how useful the prior research could become panacea for encountering administrative corruption of developing countries. Finally, based on research findings, suggestions for future research are presented

In general, many factors, including government spending, influence economic growth. In many theoretical and empirical studies, government spending is seen from the ratio between government spending and Gross Domestic Product (GDP) or government size. This research aims to examine the influence of government size on economic growth in districts/cities of South Sumatra Province. The government size to be analyzed is the amount of government spending on public services, housing and public facilities, education, and health. The data used in this study is secondary data for the 2010-2020 and covers 15 regencies/cities. The data was obtained from the Central Statistics Agency and the Regional Financial and Asset Management Agency. The analytical technique used in this research is descriptive analysis technique and quantitative analysis. Klassen Typology Approach was used to identify the regencies/cities with fast growth and the relatively lagging regencies/cities of South Sumatra Province. The study results show that government spending on public services and health has a positive and significant effect on economic growth. Meanwhile, the government spending on housing and public facilities has a positive and insignificant effect. In contrast, the government spending on education has a negative and significant impact on economic growth. This study recommends local governments increase the allocation of regional expenditure to sectors that lead to economic growth, especially in newly created regions.

Countries face the risk of natural resource curse because of making their economic growth excessively dependent on natural resources. Although excessive resource dependence causes such a risk, it is inevitable that resource-rich countries will need resource rent up to a certain level of economic maturity. On the other hand, transferring the wealth achieved after this maturity level to productive investment areas also reduces the resource dependency levels of countries. In this context, countries that capture the possible inverted U-shaped relationship between economic growth and resource dependence can escape the curse. Based on this, the aim of this research is to determine the validity of the Kuznets type relationship between resource dependence and economic growth for the first time in the literature. Nine nations that rely heavily on natural resources are used as a sample for this. The countries with a share of total resource rent in national revenue greater than 25% are taken into consideration throughout the selection process for these countries. Using novel panel data methodologies, the effects of capital accumulation, public spending, foreign direct investment, and economic growth on the dependence on natural resources is examined from 1993 to 2021. The results reveal that capital accumulation reduces resource dependency while foreign investments and government size increases it. In addition, the Resource-Based Kuznets curve concept is supported by empirical data demonstrating an inverted-U-shaped relationship between economic growth and resource dependence for these nations. The thresholds derived from the parameters show that Saudi Arabia and Kazakhstan are well beyond this cutoff. The Democratic Republic of the Congo and the Republic of the Congo, on the other hand, remain a long way from this threshold. Furthermore, Iraq, Mongolia, Iran, and Azerbaijan have national incomes that are close at the threshold.

Copyright of Hikama is the property of Arab Center for Research & Policy Studies and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

We revisit the role of government size and labour market institutions on macroeconomic volatility, for the case of the eurozone since the adoption of the euro, which can provide a more homogeneous setting to test for macroeconomic volatility. The behaviour of the volatility of inflation looked rather different from that of GDP. Neither government size nor labour market institutions seemed to affect the volatility of GDP, except when demographic factors were included into the estimated equation; whereas lower volatility of inflation was related to a lower share of non-prime age workers and lower wage volatility. [ABSTRACT FROM AUTHOR]

Maintaining financial stability has always been one of the most important economic aims. In order to achieve this goal, the factors affecting the financial stability must be identified and analyzed. Most of the researchers have examined the financial stability from the perspective of price stability and policies of Central Bank and they have considered it as a necessity for economic growth. The literature related to the financial stability show the effect of variables like financial development and financial liberalization on the financial instability. However, some conflicting results have been reported about the direction of this impact. Accordingly, the purpose of this study is to investigate the effect of various factors on the financial instability with an emphasis on the variables of the financial development and financial liberalization in developing countries. The financial instability index has been calculated based on a Principal Component Analysis (PCA) approach and annual observations from 2005 to 2019 have been extracted. The research model is estimated using the System Generalized Method of Moments (SGMM). In contrast with public beliefs, the results indicate that the financial development in developing countries has a positive effect on the financial instability and exacerbates it due to the lack of correspondence between the goals of policymakers and the realities of financial markets in these countries. Moreover, the impact of the financial liberalization on the financial instability in the countries which were under consideration has been positive and shows that following the fiscal policies implemented in the countries with developed financial markets regarding the financial liberalization is not working in developing countries. Thus, financial decision-makers in these countries must adopt stabilization policies in accordance with the characteristics of their financial markets. In addition, the results of this study confirm the negative impact of the government size on financial stability in developing countries, emphasizing the reduction of the government presence and the development of private sector in such markets.

US states grant their local units different levels of autonomy in several dimensions including fiscal, functional, structural, and legal discretion. This study uses a comprehensive, multidimensional measure of autonomy to test its association with the fiscal behavior of over 19,000 municipalities in the United States. Competing theoretical predictions range from significant increases in government size (Leviathan model), to no effect (median-voter model), and even smaller governments (institutional collective action model). Quantile regression analysis is implemented to test the association between autonomy and fiscal behavior for different city sizes. The empirical findings indicate that cities with more autonomy tend to spend less and have lower taxes and debt. The strength of this relationship, however, varies by city size. [ABSTRACT FROM AUTHOR]

The ongoing discussion regarding the role of the free market economy and the extent of state intervention is a critical subject in economics. This matter holds special significance for transition economies, as it presents both challenges and opportunities in such contexts. One may perceive the degree of trade openness as a path toward welfare societies. However, the dual impacts of trade openness on an economy, namely, the compensation and efficiency hypotheses, must be considered. The compensation hypothesis proposes that global trade can enhance the economic influence of the state, whereas the efficiency hypothesis advocates for a contraction in the state’s economic undertakings. This study focuses on interpreting this complex scenario, specifically in the context of the European Union’s transition economies. The aim of this research is to uncover how the economic magnitude of a nation influences trade liberalization, and consequently the free market economy, in Central and East European (CCE) countries, using public choice theory as a foundation. The research delves into the causal relationship between trade openness and government size in eleven CCE countries—Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, the Slovak Republic, and Slovenia. The period covered in this study ranges from 1996 to 2021. The methodological tool utilized for this investigation is the Kónya bootstrap Granger causality test, which accommodates cross-sectional dependence and country-specific variances. The novelty of this study lies in its application of both the compensation and efficiency hypotheses to the context of 11 transition economies in the Central and Eastern European (CCE) region. The results from the Granger causality test demonstrate a unidirectional positive correlation between trade openness and the size of the government for Bulgaria, Croatia, Czechia, and Estonia. On the contrary, Slovenia exhibited a unidirectional negative correlation. These findings confirm the applicability of the compensation hypothesis in Bulgaria, Croatia, Czechia, and Estonia, while supporting the efficiency hypothesis in Slovenia.

As a provider of public goods and a corrector of externalities, the government has a significant effect on the local environment. Based on annual province-level data from 1998 to 2015, this paper decomposes the changes in sulfur dioxide emissions into end pollution control effects and source pollution control effects by a complete decomposition model. It then uses a spatial econometric model to investigate how government size expansion affects sulfur dioxide emissions. The results show that under the promotion system based on appointment, the local government size and the neighboring government size are not conducive to reducing local sulfur dioxide emissions. With the expansion of the government size, the degree of environmental degradation caused by competition among governments is more serious. In the way of influence, the impact of local government size on the sulfur dioxide emissions is mainly through restraining the effect of end pollution control. The impact of neighboring government size on the sulfur dioxide emissions is mainly through weakening the effect of source pollution control. [ABSTRACT FROM AUTHOR]

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Introduction: Although the use of the happiness economy approach does not have much history, since policy makers generally make decisions in the direction of increasing well-being and public satisfaction, it becomes important to quantify the concept of mental well-being and examine the factors affecting it in order to improve happiness in society Methods: The purpose of this research is to investigate the effect of government size on people's happiness in two different regimes according to the level of human development in 110 selected countries for the period of 2006 to 2017. For this purpose, threshold panel regression has been used. The information needed for this research includes the happiness variable from the World Happiness Information Bank, economic growth rate, unemployment rate, inflation rate and government size from the World Bank database and human development index from the United Nations Development Program. Findings: The model estimation results show that the variables of government size, economic growth, inflation and unemployment have a significant effect on happiness. According to the threshold limit calculated for the human development variable (0.577), the effect of government size on happiness is different in two regimes. Discussion: According to the findings of the research, increasing the size of the government below the threshold of human development leads to a decrease in the happiness of the people of the society, but after crossing the threshold of human development with the increase in the size of the government, the happiness of the people increases, which shows the efficiency of the government policies. Also, with the increase in economic growth, happiness increases and with the increase in inflation and unemployment, happiness decreases, and the noteworthy point is that the negative effect of unemployment is greater than the negative effect of inflation. [ABSTRACT FROM AUTHOR]

This study has two main aims: to test the validity of the BARS curve in Turkey for the period 1974-2016 and to estimate the optimal government size for that period and compare it with the current situation. It uses the Autoregressive Distributed Lag bounds test and quadratic equation methods. The empirical findings of the study confirm the validity of the BARS curve by providing strong evidence for the existence of an inverted U-shaped long-run relationship between government size and economic growth. Unlike many previous studies that use a single proxy measure for government size, this study uses all available fundamental indicators and their sub-components. The empirical results show that for the period studied all proxy measures of government size exceed the optimal except for total central government budget expenditure and defence expenditure. Therefore, decreasing the size of the government, other than for these two indicators, will increase economic growth in the long run.

Firm profits play a pivotal role in government activity. In times of crises, when profits are low, governments increase their size. Also, if firm profits rise to a level far above what would have been earned in a competitive economy, firms might gain market power, which in turn might influence the activity of the government. But are these changes in the activity of the government also efficient? In this paper, we perform a detailed empirical study on the potential effects of firm profits and markups on government size and effectiveness. Using data on 22 European countries for a period of 17 years and an instrumental variables approach, we find that there exists a robust relationship between firm gains and the activity of the state, in the sense that higher firm profits reduce government size and effectiveness. Even in a group of developed countries, such as the European countries, firm power may affect state activity.

This paper discovers the asymmetric relation between government size and economic growth in Malaysia, an emerging Asian economy, by utilising a dynamic threshold nonlinear approach. The study finds empiric evidence that the threshold effect linking government size to economic growth in Malaysia exists when two different proxies of government size are set as the threshold variable. On closer inspection, it is found that an inverted U-shaped Armey curve is present when allowing for endogenous government size threshold proxied by government operating/real GDP. However, a U-shaped curve of nonlinear relationship exists instead when the government investment/real GDP serves as the threshold variable. In general, this paper gives policymakers a real insight into the optimal government size in Malaysia especially when designing an effectual fiscal policy to advance sustainable economic growth to materialise its Shared Prosperity Vision by the year 2030.

This article analyzes the implementation of fiscal limit targets and their influence on government size and productivity of public expenditures in Brazilian municipalities between 2005 and 2016. For this purpose, a panel data model was estimated, using the differences in differences empirical strategy and applying the Fiscal Responsibility Law (FRL), subdivided into three categories as the main interest variable, in order to identify the municipalities that have complied with the payroll limit; those who met the public debt limit; and those who met both limits. Results obtained demonstrated that the adoption of fiscal targets positively affected public finance management through the compliance with public debt limits, as this promotes a reduction in government size. Besides, municipalities that abide to the FRL reduce their government size, whereas their GDP per capita, improves. On the other side, when the municipal manager belongs to same party as the state governor there is an increase in the government size. In view of the results, it is recommended that stricter measures be adopted in the application of the Fiscal Responsibility Law, in order to provide greater efficiency in the management of public spending − smaller government and productive spending −, especially in election years. [ABSTRACT FROM AUTHOR]

What lessons does prior research on causes of corruption offer public administrators operating in, and researchers studying the dynamics of, public sectors of most governments developing societies? In this paper we summarize a voluminous body of prior economic, social and political science research that tells us about the roots of corruption in public sector of developing countries. Informing the analysis is a "review of reviews" of a sprawling research that examines six indicators: government size, oil revenue, democracy, quality of bureaucracy, rule of law, and human development; that are assumed to be major factors in increasing or decreasing the level of corruption in developing societies. We discern from this formidable body of research what is known about causes of corruption, what is left to know, and how useful the prior research could become panacea for encountering administrative corruption of developing countries. Finally, based on research findings, suggestions for future research are presented. [ABSTRACT FROM AUTHOR]

This study aims to examine the asymmetric effects of fiscal decentralisation and institutional quality on government size for selected Asian economies. The study employs asymmetric autoregressive distributed lag (ARDL) methodology by using time series data ranging from the period 1984 to 2017. The results show that positive shocks in expenditures decentralisation (ED) enhance government size in Japan, Kazakhstan, Thailand, Turkey, and reduces it in Korea, Rep. in the long-run. While negative shock in ED reduces government size in Pakistan, Thailand, Turkey and increases it in Kazakhstan and Mongolia in the long-run. Whereas asymmetric results in the long-run show that a positive shock in revenue decentralisation (RD) increases government size in Pakistan, Japan, Kazakhstan, Thailand, and Turkey, and a negative shock in RD decreases government size in Pakistan, Mongolia, Thailand, and Turkey. Our asymmetric results of institutional quality are also country-specific. [ABSTRACT FROM AUTHOR]

The article proposes a new unique approach to assessing the economic efficiency of national governments. The assessment is based on the indicator of gross free product per capita, which is a difference between GDP and government size per capita. This method was used to analyze the situation in two post-communist states – Poland and Ukraine. The author studied their economic development in 2009–2019, and the received data was used to draw conclusions about economic policies in the two countries in the period in question. A forecast has been made about the possible impact of the Covid-19 pandemic on economic processes from the perspective of changes in the gross free product per capita.

The purpose of this study is to investigate the effect of trade and foreign direct investment on economic growth of OPEC members using the convergence and gravitation model. The model is estimated by the spatial Durbin regression model (SDM) using spatial panel data for the period 2010-2020. Convergence is estimated using cross-sectional data method and gravitation model using panel data method. The results show that foreign direct investment affects economic growth inside and in neighbor countries through spillovers, increasing trade and technology imports in the countries. Also the size of government has no effect on trade and economic growth. The results of convergence and gravitation model show that there is convergence between the target countries and gross domestic product has a positive effect on bilateral trade, but the Linder variable has a negative effect on mutual trade, consistent with the theory.

For more than a century, the causal relationship between government size and economic growth has been a challenging issue in the public sector economics. However, there is no theoretical or empirical consensus among economists on this issue. Accordingly, it seems that the best way to resolve these theoretical and empirical contradictions is experimentally investigation the causal relationship between government size and economic growth in each country. Therefore, this paper investigates the causal relationship between government size and economic growth using the Markov-Switching Granger Causality Approach in Iran over the period 1967-2017. The findings confirmed the existence of a non-linear causal relationship between government size and economic growth and showed that government size had a significant negative effect on economic growth in the form of a two-regime structure (regime Zero: 1966-2002 and regime one:1983-1987), although this negative effect was greater in regime one than in regime zero. This larger negative effect can be rooted in the fact that the share of current expenditure in total government expenditure was significantly larger in the years related to regime one (compared to regime zero). Finally, contrary to Wagner's law, Findings did not confirm the positive and significant effect of economic growth on government size in Iranian economy.

In general, many factors, including government spending, influence economic growth. In many theoretical and empirical studies, government spending is seen from the ratio between government spending and Gross Domestic Product (GDP) or government size. This research aims to examine the influence of government size on economic growth in districts/cities of South Sumatra Province. The government size to be analyzed is the amount of government spending on public services, housing and public facilities, education, and health. The data used in this study is secondary data for the 2010-2020 and covers 15 regencies/cities. The data was obtained from the Central Statistics Agency and the Regional Financial and Asset Management Agency. The analytical technique used in this research is descriptive analysis technique and quantitative analysis. Klassen Typology Approach was used to identify the regencies/cities with fast growth and the relatively lagging regencies/cities of South Sumatra Province. The study results show that government spending on public services and health has a positive and significant effect on economic growth. Meanwhile, the government spending on housing and public facilities has a positive and insignificant effect. In contrast, the government spending on education has a negative and significant impact on economic growth. This study recommends local governments increase the allocation of regional expenditure to sectors that lead to economic growth, especially in newly created regions. [ABSTRACT FROM AUTHOR]

CO2 emission reduction is a long-term strategy for China to promote its government and economic size. However, this study examines the asymmetric impact of government size and economic size on CO2 emissions in China. The study embraces the nonlinear ARDL framework of time series data analysis as proposed by Shin et al. (2014), which disentangles the positive and negative shocks to government size and economic size. We find that the response of CO2 emissions to government size and economic size positive shocks differs from the negative shocks. Empirical outcomes revealed that a positive shock of government size exerts an insignificant positive on CO2 emissions, while a negative shock of government size reduces CO2 emissions. More specifically, a positive shock of economic size mitigates the CO2 emissions of China in long run. Policymakers should redesign the energy and environment policies in the framework of government size and economy size. [ABSTRACT FROM AUTHOR]