The Impact of Government Size and Governance on Economic Growth in Perspective Document Countries (Nonlinear Threshold GMM Approach)

Although economic growth is affected by the growth of factors of production, governance and government size were also effective in economic growth. In this study, the impact of government size and governance on the economic growth of perspective document countries evaluated over the period 2017-2006. To meet this end, The World Bank database and data of perspective document countries were used. Moreover, the optimum size of the government evaluated based on the proposed Baro method. This article sought to estimate the effect of size government and governance by using panel data and the threshold nonlinear two-stage generalized method of moment. The findings indicated that the average optimal size of the government was 18.38% of the gross domestic product. Also, in countries with less government size, the growth of government expenditures had a positive effect on economic growth, while countries with a government size larger than optimal, government spending had a negative effect on economic growth. In addition, the results confirmed economic growth was affected by the governance of the state.