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Expenditure Efficiency and the Optimal Size of Government in Developing Countries

  • Yogi Rahmayanti

    ()

    (Osaka School of International Public Policy, Osaka University)

  • Theara Horn

    ()

    (Graduate School of Economics, Osaka University)

Government efficiency plays a significant role in the relationship between government expenditure and economic growth. Based on panel data from 63 developing countries 1990 to 2003, we calculate efficiency scores using Data Envelopment Analysis, incorporate them into a simple model of growth with government expenditure. We find that there is a critical level of efficiency required for government expenditure to have positive effect on growth. Further, above a critical level of efficiency, greater efficiency lowers the optimal size of government expenditure required to maximize growth.

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File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1020.pdf
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Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 10-20.

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Length: 19 pages
Date of creation: Jul 2010
Date of revision:
Handle: RePEc:osk:wpaper:1020
Contact details of provider: Web page: http://www.econ.osaka-u.ac.jp/
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  1. Folster, Stefan & Henrekson, Magnus, 2001. "Growth effects of government expenditure and taxation in rich countries," European Economic Review, Elsevier, vol. 45(8), pages 1501-1520, August.
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