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Journals / Bulletin of Economic Theory and Analysis / 2022 / Cilt: 7 - Sayı: 2

Testing the Armey Curve Hypothesis in Turkey: Evidence from the Provincial Data

Devran ŞANLI
Pages
425–443
Publication Date
2022-12-31
DOI
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AI Summary & Key Takeaways

AI Insight
⚡ TL;DR(Too Long; Didn't Read)

The results indicate that the optimal level of public expenditures is 25.2%.

📌 3 Key Takeaways

🎯
Objective & Hypothesis:This study aims to empirically test the Armey Curve hypothesis (optimal government size) for Turkey with panel data consisting of 81 provinces and 17 years.
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Key Findings & Data:The results indicate that the optimal level of public expenditures is 25.2%.
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Conclusion & Impact:Therefore, in order to maximize the growth rate, public expenditures should be reduced to an optimal level.
🔬Design:Modeling & Simulation
📍Scope:Comprehensive Sample
⚙️Variables:Optimal Public Expenditures · Economic Growth · Armey Curve

Abstract

This study aims to empirically test the Armey Curve hypothesis (optimal government size) for Turkey with panel data consisting of 81 provinces and 17 years. In this context, a quadratic model has been established in which economic growth is the dependent variable, and public expenditures are the independent variable. AMG estimates obtain the optimal size of public expenditures. The results indicate that the optimal level of public expenditures is 25.2%. Moreover, province-specific findings provide that the Armey curve is valid in 16 provinces, and the critical point of the curve takes values ranging from 12%(Istanbul) to 46%(Elazig). Considering the average volume of public expenditures is 31.6% throughout the panel, it is concluded that the expenditures exceed the optimal level. These results show that public expenditures are in the region of diminishing returns. Therefore, in order to maximize the growth rate, public expenditures should be reduced to an optimal level.

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Cite This Article

ŞANLI, D. (2022). Testing the Armey Curve Hypothesis in Turkey: Evidence from the Provincial Data. Bulletin of Economic Theory and Analysis, Cilt: 7 - Sayı: 2, 425–443. https://ajindex.com/articles/876319

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