BACKGROUND OF THE STUDY
The size of government and its impact on economic growth has emerged as a major public choice issue facing economies in transition. Previous research focused predominantly on size of government in industrialized countries. However, given the openness of most less developed countries, trade dependency and vulnerability to external shocks, the role and size of government become germane to adjustment and stabilization programmes. The question of the size of government has traditionally been divided between two extremes. The first argues that larger government is typically detrimental to efficiency, productivity, and growth. The basis being that the public sector is not responsive to market signal; and onerous regulatory process that engenders higher productivity cost; and distortions that arise from both fiscal and monetary policies. Arguments in favour of larger government articulate the need for provision of certain goods and services that would otherwise not be provided by the private sector, in order to place the economy on a predetermined growth path. The later position is pre-dated on the issue of market failure arising from externalities.