Size of the Government, Quality of Institutions and Growth in SAARC Countries

One elusive question still attracts the attention of the researchers and policy makers whether government has a positive or negative role in the growth of a country. Washington consensus depressed the role of the government as an anchor of growth, while the post Washington consensus again focuses on the role of the government as the major player to revive growth. Theoretically, the linkages have been well established between the government spending and growth. However, the extensive use of cross country growth regressions in 1980s and 1990s highlighted the controversies in the empirical testing of these schools of thought using data for different countries and different techniques to prove their hypothesis. Most of these studies concentrated on the developed countries, while few try to explore the structure in developing countries. The question still remains, whether public sector promotes or retards growth.