The Impact of Government Size on Economic Growth: A Case Study of Selected G20 Countries

Abstract

    The role of government in the economy has long been a subject of debate among economists and various economic schools. Most economists consider the most important tasks of the state to include security, public services, health, and education. However, some believe these tasks are insufficient and advocate for more extensive state involvement in the economy, including production, distribution, economic policymaking, and price control. This paper examines the effect of government size on the economic growth of selected G20 member states over the period from 1990 to 2018, using the Panel data model. In this study, government spending is defined as a percentage of GDP, with the second power of government spending used as an indicator of government size. The results show that government size has a direct and significant effect on economic growth, while the second power of government size has a negative impact on economic growth. Additionally, the formation of gross fixed capital has had a positive impact on economic growth.