Growth effect of government expenditures in West African countries: A nonlinear framework

Abstract

The study investigated the impact of government size on economic growth and determined the optimal government size that will promote growth in ECOWAS Countries. This was with a view to determining the relationship between government size and economic growth in ECOWAS countries. The study employed annual secondary data. Data covering the period 1980 to 2015 on total government spending, gross domestic product, imports and exports of goods and services, domestic investment, inflation rate, total population and institutional quality were collected from World Development Indicators. Data were analysed using Panel Fixed Effect analytical technique. The study found that government size had positive and significant (t = 3.59, p < 0.05) impact on economic growth when government size is below the optimal size whereas the impact was negative and significant (t = -3.08, p < 0.05) when government size is above the optimal size. Furthermore, the optimal government size is 25.31% of total GDP on the average for ECOWAS countries and this level has not been reached by any of the ECOWAS member countries. The study concluded that the relationship between government size and economic growth depends on optimal government size in ECOWAS countries