Economics of Nations during Austerity? Does Government Size Matters?

Authors

1 International Center for Research in Islamic Economics, Minhaj University Lahore, Pakistan

2 Department of Economics, Minhaj University Lahore, Pakistan

3 Faculty of Economics and Management Sciences, Minhaj University Lahore, Pakistan

Abstract

This study examined the impact of austerity and government size on the economic performance of developed countries. The study was unique in a sense that it incorporates both the austerity and government size on the economic performance of developed countries, and according to Erixon these two variables need to be taken in a same study to get the better depiction of the economic performance. The study used 20 developed countries, and by applying the fixed effect model, the study concluded that both the austerity and government size has negative association with economic performance. The negative effect of austerity was way more than government size. According to the results, the study suggested that the government may need to stay away from applying austerity measures due to its devastating impact on the economy.

Keywords

Iranian Economic Review

Articles in Press, Accepted Manuscript
Available Online from 05 August 2022

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