The Comparative Study of Effect of the Optimal Size of Government Consumption and Investment Expenditures on HDI (Developed VS Developing Nations)

Government size has negative and positive impact on economic growth. In this paper, we conduct an analysis with dealing the impact of government size on human development index (HDI). The regression will be empirically analyzed using generalized method of moments (GMM) with two staged least squares in a panel data framework for 30 developed and 34 developing nations for 1980-2009. The impact of government size (measured by consumption and investment expenditures) on HDI is studied. The results reveal that the optimal size of government consumption expenditure on HDI in developed countries is greater than the developing countries. While, in developing countries the government investment reveals a linear and increasing patterns.