Government expenditure and economic growth: does the role of corruption control matter?

Abstract

This study focuses on analyzing the role of corruption control in the impact of government expenditure on economic growth. The data were collected from 16 Emerging Markets and Developing Economies (EMDEs) in Asia over the period 2002–2019. Generalized method of moments (GMM) and threshold model were used to estimate research models. The estimation results show that government expenditure and corruption control have a negative impact on economic growth. Specifically, the interaction between government expenditure and corruption control can reduce the level of the negative impact of these two factors on economic growth, which is an interesting finding of this study. Moreover, unlike previous studies, the threshold model estimation results reveal that corruption control has two threshold values of -0.61 and 0.01, respectively. Accordingly, EMDEs in Asia can make the positive impact of government expenditure on economic growth if corruption control is above the threshold value of 0.01.