Government Size and Economic Growth: The Impact of the Arab Spring

Volume العدد الثالث|Issue 6| May 2023 |Articles

Abstract

​This paper investigates first the causal relationship between government size and economic growth in a number of North African and Middle Eastern countries during 2000–2020, as well as the impact of the Arab Spring revolutions on this connection. Second, it examines the nonlinear relationship between government size and economic growth, known as the BARS curve, which identifies the optimal government size using the Multivariate Dynamic Panel Threshold Model. The study reveals a causal relationship between government size and economic growth, with a 1% increase in government size resulting in a 2.4% decrease in GDP growth rate for the entire sample. It also confirms the significant influence of the Arab Spring on government size and its post-2011 relationship with economic growth compared to earlier periods. This suggests the presence of a BARS curve in countries that have experienced revolutions. The estimated optimal government size is determined by spending approximately 9.75% of GDP on average.

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