Does The Government Size Cause Economic Growth? Empirical Evidence from Selected ASEAN Countries

This paper investigates the link between government size and growth in the long run for an unbalanced panel of seven ASEAN-3 countries (N=7) with annual data for the period 1980-2012 (T=33).The relation between government expenditure and economic growth has been extensively investigated by the use of different models. The model used is the pooled mean group, mean group and dynamic fixed effect model. By examining both short run and long run effects, the empirical results demonstrate a positively significant influence of government expenditure on economic growth on the long run. Furthermore, average error-correcting speed is approximately 0.04% per annum, which shows that a country converges to the common steady-state income path extremely slow.