The Impact Of Government Consumption On Growth €“ Global Evidence

The effects of government consumption on economic growth are investigated in this study in a panel of world economies. Renewed attention has been recently paid to exploring this important relationship, especially in the aftermath of the global economic and financial crisis which resulted in unprecedented fiscal interventions globally. Despite the numerous attempts at investigating it, the literature still seems lacking in providing a unison answer to the question on the appropriate role of government in an economy. Theoretically the effects of government consumption on growth may be both positive and negative, with a lot of ambiguity also present in empirical studies. Given this uncertainty supplementary evidence is needed to further investigate the link between government consumption and economic growth. To tackle this important question this paper applies panel data techniques in a broad sample of as many as 178 world economies covering the period since 1990 until 2020. Overall, this study reports consistent and robust evidence on the negative impact of government consumption and tax revenues on economic growth.