The Relationship Between Government Size and Public Expenditure Efficiency in Iran

Document Type : Original Article

Authors

Department of Economic Sciences, Faculty of Economics and Social Sciences, Shahid Chamran University of Ahvaz, Ahvaz, Iran

Abstract

Analyzing the relationship between the size of government and the efficiency of public expenditures can play a critical role in making optimal decisions aimed at improving the management of public resources. This study investigates the relationship between government size and the efficiency of public expenditures in Iran over the period 2000 to 2023. To this end, the Data Envelopment Analysis (DEA) method is first employed to measure the efficiency of public expenditures. Subsequently, the impact of government size on expenditure efficiency is examined using a regression model. The findings indicate that the efficiency of public expenditures in Iran has varied over the study period, and certain government size indicators have a statistically significant effect on it. Specifically, the hypotheses regarding the relationship between government size and public expenditure efficiency in terms of distribution and economic management indicators are rejected. In contrast, the hypotheses concerning stability and infrastructure indicators are confirmed. Accordingly, it is recommended that policymakers prioritize targeted reforms in the government’s expenditure structure, with a particular focus on stability and infrastructure indicators. Given the complexity of the relationship between government size and the efficiency of public expenditures, further research using more accurate data and advanced methodologies is necessary. It is also suggested that future studies explore other factors influencing public expenditure efficiency. Finally, it should be emphasized that improving the efficiency of public expenditures is a complex and time-consuming process that requires coordinated efforts from all stakeholders, including the government, the private sector, and civil society. With the adoption of appropriate policies and their effective implementation, it is possible to enhance public expenditure efficiency and improve the country’s economic and social conditions.

Keywords

Main Subjects

References

Afonso, A. & Tovar Jalles, J. (2011). “Economic Performance and Government Size”. European Central Bank, Working Paper Series, No 1399. doi: 10.2139/ssrn.1950570
Afonso, A.; Jalles, J. T. & Venâncio, A. (2021). “Taxation and public spending efficiency: An international comparison”. Comparative Economic Studies, 63, 356-383.‏ doi.org/10.1057/s41294-021-00147-2
Afonso, A. & Fraga, G. B. (2024). “Government spending efficiency in Latin America”. Empirica, 51(1), 127-160. doi.org/10.1007/s10663-023-09599-4
Aghazadeh Baktash, F. & Dizaji, M. (2017). “The impact of cost efficiency and government size on economic growth in selected countries worldwide”. Research on Economic Growth and Development, 7(27), 125-142. [In Persian]. dor: 20.1001.1.22285954.1396.7.27.8.0
Ahmadi, A.; Jabal Ameli, F. & Abdali, G. (2024). “The impact of government size on the underground economy in Iran: Emphasizing the role of government budget imbalance”. Economic Research, 59(2), 327-361. [In Persian]. doi: 10.22059/jte.2024.376756.1008910
Alesina, A. & Perotti, R. (1996). “Income Distribution, Political Instability, and Investment”. European Economic Review, 40(6), 1201-1228. doi.org/10.1016/0014-2921(95)00030-5
Asimakopoulos, S. & Karavias, Y. (2016). “The Impact of Government Size on Economic Growth: A Threshold Analysis”. Economics Letters, 139, 65-68. doi.org/10.1016/j.econlet.2015.12.010
Barro, R. J. (1990). “Government Spending in a Simple Model of Endogeneous Growth”. Journal of Political Economy, 98(5), 103-125. doi.org/10.1086/261726
Fatemi, M. & Zayandeh Roodi, M. (2024). “The optimal size of government and its effect on employment in the industrial sector in Iran”. Industrial Economics Research, 7(26), 85-106. [In Persian]. doi: 10.30473/jier.2024.69460.1416
Fathollahi, E. (2023). “A study of economic and social factors affecting government spending in Iran”. Economic Policies and Research, 2(2), 55-95. [In Persian]. doi: https://doi.org/10.22034/jepr.2024.140024.1059
Forte, F. & Magazzino, C. (2016). “Government size and economic growth in Italy: a time-series analysis”. European Scientific Journal, 12(7).‏ doi.org/10.19044/esj.2016.v12n7p149
Gnangoin, Y. T. B.; Edjoukou, A. J. R. & Kassi, D. F. (2019). “Public spending and economic growth in Latin America Countries: A panel Fixed effect analysis”. International Journal of Business and Economic Sciences Applied Research (IJBESAR), 12(1), 50-63. https://ssrn.com/abstract=3502235
Gregoriou, A. & Ghosh, S. (2009). “The impact of government expenditure on growth: Empirical evidence from a heterogeneous panel”. Bulletin of Economic Research, 61, 95-102. doi.org/10.1111/j.1467-8586.2008.00297.x  
Golkhandan, A. (2015). “Globalization and Government Size: Testing the Roderick Hypothesis”. Strategic Macro Policies, 3(10), 39-62. [In Persian]. https://www.jmsp.ir/article_10858.html
Guisan, M. & Exposito, P. (2010). “Health Expenditure Education Government Effectiveness Quality Life Africa Asia”. Regional Sectoral Economic Studies, 10(1), 115-126. https://ideas.repec.org/a/eaa/eerese/v10y2010i10_5.html
Haji, Gh.; Komijani, A. & Hozhabr kiani, K. (2015). “Investigating Effect Factors Government Size Iranian Provinces”. Iranian Quarterly Journal Applied Economic Studies, 4(15), 55–80. [In Persian]. dor: 20.1001.1.23222530.1394.4.15.3.4
Hwang, H.; Kim, J. & Lee, D. (2021). “Public Expenditure Efficiency and Government Size: Evidence from Asian Economies”. Asian EcoPolicy Review, 16(1), 74–92. 10.2298/EKA1293007C
Brahim, T. M. & Isa, S. (2024). “IMPACT OF GOVERNMENT SIZE ON ECONOMIC GROWTH IN NIGERIA”. African Journal of Social and Behavioural Sciences, 14(1).‏ https://journals.aphriapub.com/index.php/AJSBS/article/view/2544
Pessino, C.; Izquierdo, A. & Vuletin, G. (Eds.). (2018). Better spending for better lives: how Latin America and the Caribbean can do more with less. Inter-American Development Bank. http://dx.doi.org/10.18235/0001217-es
Khodadad kashi, F.; Noorani Azad, S. & Shateri, S. (2021). “The Impact of Government Size and Governance on Economic Growth in Vision Document Countries (Nonlinear Threshold GMM Approach)”. Journal of Economic Growth and Development Research, 11(41), 35-52. [In Persian]. doi: https://doi.org/10.30473/egdr.2019.45781.5175
Khomjani, Sh.; Sarwar, R.; Amir Azodi, T. & Arbabi Sabzevari, A. (2023). “Structural Analysis Barriers Effective Realization Good Urban Governance (Case Study: Tehran Metropolis)”. Quarterly Journal Urban Future Studies, 3(2), 71–48. [In Persian]. doi: 10.30495/uf.2023.1981017.1103
Lee, H.; Smith, R. & Zhang, T. (2022). “Effects Government Size Public Expenditure Efficiency High-Income Economies”. European Economic Review, 146, 104-282. 10.46585/sp31011690
Moftakhari, A.; Jafari, M. & Delfan, M. (2023). “Investigating the nonlinear effects of government size on multidimensional poverty in developing countries: A GMM approach”. Journal of Macroeconomic Research, 18(38), 103-130. [In Persian]. doi: 10.22080/iejm.2024.26274.2010
Mokoena, K. & Tweneboah, G. (2025). “Government size and output volatility in Sub-Saharan African Countries: do threshold levels exist?”. Cogent Social Sciences, 11(1).‏ doi.org/10.1080/23311886.2025.2482887
Naimi, S.M. (2012). “Background 'Economic Analysis Law' Approach”. International Legal Research, 5(16), 172-219. [In Persian]. https://journals.iau.ir/article_513151.html
Nyasha, S. & Odhiambo, N. M. (2019). “Government size and economic growth: A review of international literature”. Sage Open, 9(3), 1-12. doi.org/10.1177/2158244019877200
Rahmayanti, Y. & Horn, T. (2011). “Expenditure Efficiency Optimal Size of Government in Developing Countries”. Global Economy Finance Journal, 4(2), 46–59. https://ideas.repec.org/p/osk/wpaper/1020.html
Salehi Rozeh, M. & Bakhshizadeh, M. (2017). “Examining the effect of government size on economic growth in selected OPEC member countries: A threshold analysis”. Quarterly Journal of Financial and Economic Policies, 5(19), 237-261. [In Persian]. http://qjfep.ir/article-1-611-fa.html
Samanipour, H.; Abounouri, I. & Nadami, Y. (2016). “Inflation and government size in Iran: A threshold regression approach”. Research on Sustainable Growth and Development (Economic Research), 16(4), 107-125. [In Persian]. dor: 20.1001.1.17356768.1395.16.4.3.2
Sarfaraz Mohammadyar, M.; Sokhanvar, M. & Entezar, E. (2023). “The nonlinear effects of entrepreneurship and institutional factors on financial development”. Financial Economics, 17(65), 279-306. [In Persian]. doi: 10.30495/fed.2023.707995
Scholz, T. R. (2024). “Improving the measurement of economic freedom by replacing government size with government effectiveness”. The European Journal of Comparative Economics, 21(1), 3-33.‏ https://ideas.repec.org/a/liu/liucej/v21y2024i1p3-33.html
Sedaqat Kalmarzi, H. (2022). “The impact of government size and the intensity of sanctions on the growth of value added in the industrial and mining sectors in the Iranian economy: A Markov switching approach”. Journal of Macroeconomic Research, 17(34), 61-86. [In Persian]. doi: 10.22080/iejm.2023.25824.1988
Shahinpour, A. & Abbasi, H. (2022). “The impact of government size on the resilience index of the Iranian economy: A vector autoregression (VAR) approach”. Biannual Journal of Development Economics and Planning, 9(1), 103-128. [In Persian]. dor: 20.1001.1.2821272.2022.9.1.5.5
Shakeri, A.; Momeni, F.; Mohammadi, T.; Bahmanpour, H. & Alizadeh, S. (2015). “Investigating Effect Trust Innovation Middle-Income Countries Emphasis Fukuyama’s Radius Distrust”. Financial Economics, 8(29), 19-48. [In Persian]. https://journals.iau.ir/article_515674.html
Sharifzadegan, M. H. & Ghavami, H. (2017). “Analyzing and conceptualizing the theoretical impacts of rent-seeking government on agency and the structure of society and urban economy in Iran”. Urban Economics, 2(1), 1-18. [In Persian]. doi: 10.22108/ue.2017.79473.0
Shuaibu, M. & Mamman, S. O. (2025). “Trade Facilitation and Economic Growth in ECOWAS Member States: Does Government Size Matter? ”. Journal of Industry, Competition and Trade, 25(1), 1-24.‏ doi.org/10.1007/s10842-025-00445-w
Tanzi, V. (1998). “Corruption Around the World: Causes, Consequences, Scope, and Cures”. IMF Staff Papers, 45(4), 559-594. https://www.imf.org/external/pubs/ft/wp/wp9863.pdf
Tiebout, C.M. (1956). “A Pure Theory of Local Expenditures”. The Journal of Political Economy, 64(5), 416-424. http://www.jstor.org/stable/1826343
Torabi, M.; Hataminia, A. & Heydarpour, M. (2021). “Evaluation Environmental Policy Making Southern Iran (Persian Gulf Region) Based Karl Deutsch's Regional Convergence Theory”. The Islamic Revolution Approach, 15(55), 159-176. [In Persian]. dor: 20.1001.1.20083777.1400.15.55.9.2
Yahyavi Dizaj, J. & Mohammadzadeh, Y. (2021). “The impact of government size on the globalization of the economy in selected countries”. Research on Planning and Development, 1(1), 71-109. [In Persian]. doi: 10.22034/pbr.2021.89808
Yongjin, S. (2011). “Government Size, Economic Growth and Unemployment: Evidence from Advanced and Developing Economy Countries (A Time Series Analysis, 1996–2006)”. International Review Public Administration, Taylor & Francis Journals, 16(2), 95-116. doi.org/10.1080/12264431.2011.10805198
Zahedi, N. & Sarparast Sadat, S.E. (2018). “Political Economy of Iran from the Perspective of Neo-Industrialism”. Iranian Pattern of Progress, 6(11), 105-131. [In Persian]. dor: 20.1001.1.23295599.1397.6.11.4.0
Zayandeh Roudi, M.; Jalai, S.A.M. & Fatemi, M. (2023). “Investigating factors affecting the optimal growth of government spending in the economy Using the optimal control method”. Financial Economics, 17(63), 139-172. [In Persian]. dor: 10.30495/fed.2023.702188
Public Sector Economics Studies
Volume 4, Issue 3 - Serial Number 13
September 2025
Pages 471-500

Files

History

  • Receive Date: 09 March 2025
  • Revise Date: 13 June 2025
  • Accept Date: 18 June 2025

Share

How to cite

Statistics