Economics of Nations during Austerity; Does Government Size Matter?

Document Type : Research Paper

Authors

1 International Center for Research in Islamic Economics, Minhaj University Lahore, Punjab 54770, Pakistan

2 Department of Economics and Finance, Minhaj University Lahore, Punjab 54770, Pakistan

3 Center of Economic Planning and Development, Minhaj University Lahore, Punjab 54770, Pakistan

10.22059/ier.2024.342101.1007438

Abstract

This study examined the impact of austerity and government size on the economic performance of developed countries. The study was unique in the 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 the same study to get a better depiction of the economic performance. For this purpose, the study used 20 developed countries. To estimate the data, the fixed effect model is used and the study concluded that both the austerity and government size have a negative association with economic performance. The negative effect of austerity was much more than government size. According to the results, the study suggested that the government might need to stay away from applying austerity measures due to its devastating impact on the economy.

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Iranian Economic Review
Volume 28, Issue 2
June 2024
Pages 515-535

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