GOVERNMENT SIZE AND ECONOMIC GROWTH IN TURKEY: A THRESHOLD REGRESSION ANALYSIS


Iyidogan P. V. , Turan T.

PRAGUE ECONOMIC PAPERS, cilt.26, ss.142-154, 2017 (SSCI İndekslerine Giren Dergi) identifier identifier

  • Cilt numarası: 26 Konu: 2
  • Basım Tarihi: 2017
  • Doi Numarası: 10.18267/j.pep.600
  • Dergi Adı: PRAGUE ECONOMIC PAPERS
  • Sayfa Sayıları: ss.142-154

Özet

We examine the relationship between the government size and economic growth by using threshold regression model and quarterly data over the period 1998:1-2015:1 for Turkey. Our results provide a strong evidence for the existence of a non-linear relationship. The estimated threshold levels, as a percentage of GDP, are 16.5 for the government total expenditures, 12.6 for consumption expenditures and 3.9 for investment expenditures. We find that an increase in the government size leads to a significant rise (decline) in economic growth rate when the government size is below (above) the threshold level, confirming the predictions of Armey curve. Our findings have a clear policy implication: since the realized government consumption and total expenditures are well above the estimated threshold levels, a reduction in the government size would boost the growth rate.