Abstract:
It has long been argued that a country cannot develop without government. However,
researchers have diverse opinions with regards to the impact of government size on
economic growth. Whiles some researchers (Ahuja, 2013; Zareen & Qayyum, 2014)
argue that large government size is most likely to enhance economic growth, other
researchers (Armey, 1995; Vedder & Gallaway, 1998) believe that higher government
expenditure has a tendency to harm economic growth. The third group of researchers
believes that the full presence or total absence of government has its own consequences.
The contributions of Foreign Direct Investment (FDI) in an economy, especially,
emerging economies cannot be overemphasised. As argued by some scholars (Odozi
1995; Makki & Somwura, 2004) FDI is a key driver of an economy. FDI is a significant
source of development financing which contributes extensively to growth. The effect of
government size and FDI on economic growth has, however, received less attention in
sub-Saharan African (SSA) countries.
This study empirically explores the impact of government size and FDI on economic
growth in SSA. Data for this study was sourced from World development indicators, for
42 SSA countries covering the period 2000-2016. The model for the study was estimated using the panel regression techniques. The study considered unobserved country
heterogeneity and corrected for heteroscedasticity and autocorrelation. The study found
that government size and FDI both have a positive significant effect on the economic
growth of SSA countries. The study, therefore, recommends that governments of SSA
