The Effect of Size of Government on Human Development: By using panel Data Approach
In this paper the effect of government size on social welfare (HDI) with using of time series data in period 1990-2006 in 52 countries as well as, a panel model is investigated. Human development index (HDI) is calculated with average of three indices: Life Expectancy Index, Education Index and GDP Index. In addition, two variables of government consumption expenditures as a share of GDP and government investment expenditures as a share of GDP for calculating variable of size of government are used. The impact government consumption and investment expenditures on the HDI with using of two separate equations and a panel model with fixed effects are estimated. Results suggested that government consumption and investment expenditure has a positive and significant effect on the HDI, but it reduced over time. In addition, the impact of a change in government investment expenditures takes longer to be fully realized than does the impact of a change in government consumption expenditures, such that half of the full impact of a change in government consumption expenditures on HDI is realized within 2.06 years, and half of the full impact of a change in government investment expenditures is realized within 2.15 years.
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