Although there exists empirical evidence pro and con on the relation between size of government and economic growth, some authors highlight that a positive or negative relation depends on the country under analysis .
The analysis on Brazil is particularly relevant because the federal government has grown since the Worker’s Party (Partido dos Trabalhadores, PT) came to power a decade ago and has increased the heavy tax burden (see Reuters, 2013).
A recent paper by de Mendonça and Cacicedo (2014) provides empirical evidence regarding the effect of the size of government on economic growth in the Brazilian economy for the period from January of 2000 to March of 2013. In particular, an analysis is made to see if the Armey curve fits well for the Brazilian case and the optimal government size is also estimated. The findings indicate that an increase in the size of government contributes to economic growth and that the optimal size for the Brazilian government would be approximately 22% of GDP. Brazil crossed-over this limit in 2005.
From my perspective, analytical attention should paid to the balance of payments - I think the size of the country is secondary.
Hi, check my more recent paper:
https://www.researchgate.net/publication/271587431_Fiscal_Policies_and_Subnational_Economic_Growth_in_Mexico
Is about this topic in the case of Mexico.
Article Fiscal Policies and Subnational Economic Growth in Mexico
Mind the level of regulation in terms of market competition, which basicaly determines the market freedom and the level of economic activity. I would also agree that the country size is secondary in this case. Best.
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