The Armey curve shows that there is a non-linear relationship between government size and economic growth. This paper uses threshold regression model to study relationship between government size and economic growth during 1967-2007 in Iran. The results show that linear methods are not capable to explain the relationship between government expenditure (including investment expenditure, consumption expenditure and total expenditure) and economic growth. The findings indicate government

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... e has positive effect on economic growth, but after crossing a threshold, this effect turn reversed. The thresholds are estimated 22.8% for total expenditure ratio, 9.8% for investment expenditure and 12.9% for consumption expenditure. The ratio of consumption expenditure is far away the threshold in 2007. Therefore, reconsidering in quantity, quality and efficiency of this expenditure is necessary.