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Is Government Size Optimal in the Gulf Countries of the Middle East? An Empirical Investigation

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  • Hassan Aly

    (African Development Bank)

  • Mark Strazicich

Abstract

The size of government consumption relative to national output is examined to see if it is optimal in five Gulf countries of the Middle East. We follow the methodology suggested in Barro (1990) and Karras (1996, 1997) and examine the marginal productivity of government consumption. The "Barro rule" states that government services are optimally provided when the marginal product of government consumption is one. Regression tests are undertaken for each country, and then in panels created by pooling data from all countries. Results reveal that government consumption is productive, but the size of government is too large to be optimal.

Suggested Citation

  • Hassan Aly & Mark Strazicich, 1999. "Is Government Size Optimal in the Gulf Countries of the Middle East? An Empirical Investigation," Working Papers 9911, Economic Research Forum, revised Apr 1999.
    • Handle: RePEc:erg:wpaper:9911
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