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An Analysis of Optimal Government Size for Growth: A Case Study of Pakistan

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  • Zareen, Shumaila
  • Qayyum, Abdul

Abstract

The government size is important for the development of the economy. We estimated optimum government size for growth in Pakistan by using Heerden (2008) methodology for period from 1973 to 2012. The results for the optimal size of the government show that all the variables are significant. The optimal size of the government size or equivalently the optimal size of the public spending is found to be around 17 percent of the GDP. The actual size of the government spending in current years is 18 percent. This finding is very much interesting since it highlights that the current size of government in Pakistan is above the optimum level or size. There is scope of reduction in ratio of total government spending to the GDP in Pakistan.

Suggested Citation

  • Zareen, Shumaila & Qayyum, Abdul, 2014. "An Analysis of Optimal Government Size for Growth: A Case Study of Pakistan," MPRA Paper 58989, University Library of Munich, Germany, revised 2014.
    • Handle: RePEc:pra:mprapa:58989
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    References listed on IDEAS

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    1. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
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    More about this item

    Keywords

    Optimal Government Size; Economic Growth; Pakistan;
    All these keywords.

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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