GOVERNMENT EXPENDITURE AND ECONOMIC GROWTH: REFLECTIONS ON PROFESSOR RAM'S APPROACH, A NEW FRAMEWORK AND SOME EVIDENCE FROM NEW ZEALAND TIME-SERIES DATA

Abstract

In this paper the approach taken by Ram (1986) to study the impact of government size on economic growth is examined.It is shown that the models used by Ram cannot measure the impact of increase in government expenditure on economic growth.An alternative framework, based on the conventional demand theory, is also proposed and tested using annual time-series data on New Zealand.