Government Size and Economic Growth: A Panel Data Study Comparing OECD and Non-OECD Countries

This study examines the non-linear relationship between government size and economic growth following Armey (1995). Generalized Method of Moments (GMM) estimation technique is applied to panel data consisting of 89 countries from 1990 to 2018. The results show substantial evidence for Armey curve across non-OECD countries. The findings suggest that a rise in government size initially enhances economic growth but later government size reduces economic growth once the government size crosses a certain threshold. However, the findings relating to the OECD countries do not support the presence of Armey curve.