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Assessment of the Impact of Republic of Armenia State Budget Expenditures on Economic Growth
Abstract
The current article is devoted to analysing the state budget expenditures of the Republic of Armenia regarding its impact on economic growth rates. The object of the study is the expenditures of the state budget of the Republic of Armenia. The study aims to analyze and assess the impact of the state budget expenditures on the economic growth rate in the country. The main hypothesis of the study is that inefficient spending of budgetary funds not only does not stimulate but, in many ways, is a significant factor of the slowdown in economic growth in Armenia. The methodological bases of the study are the provisions of modern economic theory regarding the impact of government spending on economic growth rates. The study used methods of qualitative, statistical and econometric analysis of indicators, followed by the identification of cause-and-effect relationships and impact assessment. Data on the expenditures of the state budget of Armenia was taken as the informative basis of the study. The study of the scientific literature allowed to identify key theoretical approaches regarding the impact of the state budget expenditures on the economic growth rates in the country. The study examined in detail the expenditure articles of the state budget of Armenia, highlighting positive and negative factors influencing economic growth. In this regard, a vector autoregression model was built to identify the impact of spending on economic growth in the country. The result of the study was the conclusion that the impact of the state budget expenditures on the economic growth rates has a long-term negative nature in Armenia. The analysis of both the structure of state budget expenditures and the constructed vector autoregression model proves that the lack of an expenditure policy regarding the development of human capital, infrastructure and other components of public spending is one of the significant factors of the slowdown in economic growth in Armenia.
This study’s primary goal was to explain how Ethiopia’s economic growth affected government spending. The time series data utilized in the study were gathered between 1980 and 2018. The time series data were subjected to the Johansen cointegration test and the vector error correction model (VECM) in order to evaluate the short- and long-term correlations between public spending and economic growth in Ethiopia. According to the study, both long- and short-term economic growths are positively and significantly impacted by government spending on education. Long-term economic growth is negatively impacted by government expenditure on agriculture, while short-term effects are negatively impacted and considerable. In the long run, investment spending has a positive but negligible impact on economic growth; however, in the short run, it has a negative but large effect. Defense spending by the government has a positive and negligible effect on economic growth over the short and long terms. Both in the short and long terms, spending on health has a favorable and considerable impact on economic growth. According to the study, government spending on the education sector would help to foster the conditions that could result in higher labor force participation rates and, consequently, higher rates of economic growth. Aiming to establish a healthy and productive society that promotes economic progress, policy should focus on complementary measures to scale-up initiatives in the health sector.
Limited empirical studies have disaggregated the government spending into infrastructure and consumption expenditures in this thematic area. More so, Kenya has witnessed a tremendous increase in spending on infrastructural projects such as highways, road, ports, fiber optic, standard gauge railway, and massive investment in road management and maintenance. All these efforts are meant to accelerate the realization of the Kenya Vision 2030 as well as the 'Big Four' agenda of the Kenyan government. The aim of this research was to investigate the role of infrastructure sector spending on private investment in the country. The study used secondary data for 1963 to 2018 from annual statistical abstracts and economic surveys report. To achieve the outlined objective, the study adopted Autoregressive Distributed Lag (ARDL) technique and the Error Correction Model (ECM) estimation approach. Infrastructure outlay in health, agriculture and roads was found to positively impact private investment in the long run. On the contrary, defense and education development spending influence private investment negatively in the long run. This paper concludes that public sector infrastructure outlays are key in determining private investment and that different public spending component affect investment differently in both long-run and short-run. This study recommends that the government should consider increasing and sustaining spending on infrastructure development projects like roads, ports, fiber optic, railways, highways maintenance, agriculture mechanization, improving public health infrastructure to stimulate further the economic activities.
The need for infrastructural development cannot be over emphasized. It serves as a key to growth and development for many countries in world today. Developments of sectors in the economy particularly the health sector, education sector, transport and construction bring even development. This paper attempts to examine government infrastructural expenditure on economic growth in Nigeria covering a period 1981-2019. Time series data was used and analysed using descriptive statistics and ARDL model. The results show that in the short-run, government expenditure on health was found to be significant though negatively related to economic growth while government expenditures on education, gross fixed capital formation, and transport and construction were all insignificant in relation to economic growth. Similarly, in the long-run, government expenditure on health showed a significant relationship to economic growth while the other explanatory variables; government expenditure on education, gross fixed capital formation as well as government expenditure on transports and construction were insignificant in explaining the nexus between government expenditure on infrastructure and economic growth in Nigeria. Thus the paper recommends that government should allocate more funds towards developing the health sector through increase in budgetary allocation.
In a seminal article, Hanushek and Woessmann explained economic growth as a function of the quality of education. While they did not find evidence of the importance of years of schooling, they argued for the relevance of cognitive skills and a basic literacy ratio for economic growth. However, this result was based on cross-country data limited to 23 observations. In this study, we extended and modified their approach based on the results of PISA (Programme for International Student Assessment) tests to explain the GDP changes over the last 50 years. Using panel data, we considered the possible lag that characterizes this relationship, used statistical methods to address the risk of reversed causality of economic performance affecting the quality of education, and extended the model by the inclusion of other potential growth factors. The results, which also included several robustness checks, confirmed the relevance of earlier education quality as a significant growth factor. Our results suggest the significance of educational skills for GDP growth, which might be treated as a confirmation of the importance of quality primary and secondary education for economic development. We showed that our results are robust to changes in the order of lags and confirmed the validity of the conclusion with the use of specification-robust Bayesian model averaging.
This research aims to the effect of government expenditures, domestic invesment, and foreign invesment to the economic growth of primary sector in central Kalimantan. This research is quantitative research with used analyzed of mutiple linier regression. Collection the variable data by library methods based on secondary data with times series on 1990-2019. Research results show that the Government Expenditures, Domestic Invesment, and Foreign Invesment for simultante has significant effect and positive to the Economic Growth of Primary Sector. For while partial that the Government Expenditures has significant effect and positive to the Economic Growth of Primary Sector meanwhile Domestic Invesment and Foreign Invesment has not significant effect.
The motivation for this study had been to assess whether the established determinants of public spending decisions in Nigeria which are government revenue, the inflation rate, the exchange rate, the growth rate of real gross domestic product, and the international price of oil, do actually affect per capita budget spending as assumed by the fiscal authorities. However, evidence from the baseline symmetric and asymmetric auto‐regressive distributive lag regressions suggest otherwise. A further probe by adding population growth rate, and gross fixed capital formation to the baseline variables to have a robust regression, suggests that while gross fixed capital formation which measures for infrastructure development was insignificant, population growth rate was crucial for the instituted determinants to exert substantial effect on per capita spending. This outcome can be taken as evidence of why the budget on a yearly basis is being perceived by most citizens as an ineffective tool of fiscal policy. Since the fiscal authorities have continued to always assume that factors that play crucial role in formulating their spending decisions; are the same with those necessary in deciding the share of Nigerians in the budget; without due consideration for population growth. Hence, ridiculing whatever goal the budget is set out to achieve.
Regardless of theoretical grounds that presumed a positive relationship between government spending and economic growth, the extant research on this nexus is inclusive. This article re-examines the relationship between public expenditure and economic growth using more copious panel data set covering 59 countries in 1990–2019. Our empirical results confirm the unidirectional causality between economic growth and government expenditure where the causation runs between public spending and GDP growth. The results at large support the Keynesian framework that asserts the importance of government expenditure in stimulating economic growth. Further, the analysis reveals that after considering all the control variables such as trade accessibility, investment and inflation public spending positively affects economic growth. With regards to control variables, it was found that investment has a significant and positive bearing on economic growth. Evidence from the regression estimates further displays that trade openness encourages evolution in developing countries. However, population growth and unemployment have a detrimental effect on economic growth.
In this study, the relationship between tax revenue, government expenditure, and economic growth has been examined for Canada, France, Germany, Italy, Japan, UK, and the USA—the G7 countries using annual data from 1980 to 2016. The study used two different panel causality approaches in order to make a comparison. According to the time domain panel causality test results, there are a bidirectional causality between economic growth and government expenditure but unidirectional causality between tax revenue and government expenditure. Moreover, there is no causal relationship between economic growth and tax revenue. On the other hand, frequency domain causality results show that there are a bidirectional short- and long-run causality between economic growth and tax revenue, and long-run causality between economic growth and government expenditure. The main finding is that the taxation policies to be implemented on the basis of the economic conjuncture of G7 countries are a powerful financial tool, with the potential to serve the economic objectives to be achieved.
The Arrow-Romer growth model helped to overcome the main drawback of the Solow-Swan model, where technical change is created exogenously, not by the firms making decisions, and formulated the conditions for endogenous growth in an economy. Nonetheless, the presentation of the Arrow-Romer model and corresponding empirical studies by the Cobb-Douglas functions hides the role of the capital-labor relationship for economic growth. A constant elasticity of substitution (CES) function, constructed by Arrow et al. (1961), allows solving this problem. So, the purpose of the current research is to test the endogenous growth of the Vietnamese economy, which has experienced a more than 30-year market-oriented reform through specifying an aggregate CES function. By applying Bayesian nonlinear regression, the research results revealed the elasticity of factor substitution (ES) lower than one. This work theoretically and empirically contributes to the endogenous growth theory in problems concerned with emerging economies. Investments in physical and human capital and technological progress are the determinants of endogenous growth. From the findings obtained, the author concludes that even though having achieved a rather impressive growth rate over more than three decades, the Vietnamese economy has not yet generated the possibility of endogenous growth, and suggests that endogenous growth can be hardly generated in emerging economies like Vietnam if important growth policies related to accumulation of physical and human capital as well as enhancement of R&D activities are not simultaneously implemented. It is indispensable to focus on substantially improving institutional quality.
Abstract The impacts of public expenditures on economic growth have been revisited in this paper with respect to capital expenditure, recurrent expenditure and the government fiscal expansion in line with support for the budgetary allocations to various sectors in the context of the Nigerian economy. Pesaran’s ARDL approach has been applied to carry out the impact analysis using annual time-series data from 1981 to 2017. Empirical findings support the existence of a level relationship between public spending indicators and economic growth in Nigeria. Incisively, recurrent expenditures of government were found to be significantly impacting on economic growth in a negative way while the positive impacts of public capital expenditures were not significant to economic growth over the period of the study. Further results from the Granger Causality Test reveal that fiscal expansion of the government that is hinged on debt financing is strongly granger causing public expenditures and domestic investment with the latter also Granger causing real growth in the economy. We, therefore, provide some important policy recommendations following the results of the empirical analysis.
Research background: Although a number of studies have been conducted on the relationship between public expenditure and economic growth, it is difficult to tell with certainty whether or not an increase in public expenditure is good for economic growth. This lack of consensus on the results of the previous empirical findings makes this study of paramount importance as we take stock of the available empirical evidence from the 1980s to date.
Purpose: In this paper, theoretical and empirical literature on the relationship between government expenditure and economic growth has been reviewed in detail. Focus was placed on the review of literature that assessed the impact of government spending on economic growth.
Research Methodology: This study grouped studies on the impact of public expenditure on economic growth based on their results. Three groups emerged – positive impact, negative impact and no impact. This was followed by a review of each relevant study and an evaluation of which outcome was more prevalent among the existing studies on the subject.
Results: The literature reviewed has shown that the impact of government spending on economic growth is not clear cut. It varies from positive to negative; with some studies even finding no impact. Although the impact of government spending on economic growth was found to be inconclusive, the scale tilts towards a positive impact.
Novelty: The study provides an insight into the relationship between public expenditure and economic growth based on a comprehensive review of previous empirical evidence across various countries since the 1980s.
The study aims to examine the potential relationship between public health expenditures, logistics performance indices, renewable energy, and ecological sustainability in Association of Southeast Asian Nations member countries. The study used secondary data, which downloaded from the World Bank website and tested for hypotheses using the structural equation modeling. The results show that the use of renewable energy in logistics operations will improve environmental and economic performance to reduce emissions, whereas environmental performance is negatively correlated with public health expenditures, indicating that greater environmental sustainability can improve human health and economic growth. The results also show that increased public health spending and poor environmental performance undermine economic growth in low efficiency and low labor productivity, thus reducing the speed of economic activity. On the other hand, the use of renewable energy in logistics cannot only improve the sustainability of the environment but also create a better national image and provide better export opportunities in environmentally friendly countries to promote sustainable economic growth. The outcomes of this study will help the policy/decision makers to make the proper planning to their investments for achieving sustainable economic growth.
In this article, we survey the existing literature on the causal relationship between government size and economic growth, highlighting the theoretical and empirical evidence from topical work. To our knowledge, this study may well be the first study of its kind to survey, in detail, the existing literature on the causal relationship between government size and economic growth—in all the countries, whether developing or developed. By and large, our study shows that direction of causality between these two variables has four possible outcomes, and that all the outcomes have found empirical support, based on variations in the country or region under study, methodology, proxies, data set used, and time frame considered. However, of the four, the most prominent is the second view, which validates unidirectional Granger-causality from economic growth to government size, followed by the bidirectional Granger-causality category. The study, therefore, concludes that the causal relationship between government size and economic growth is far from being clear-cut.
This paper examines how Russia’s GDP growth responds to changes in the structure of general government spending. We consider models with expenditures as a percentage of total spending and expenditures as a percentage of GDP. Each model is constructed as a structural vector autoregression (SVAR). We show that redistribution in favor of productive expenditures (national economy, education, healthcare) increases the rate of economic growth, and an increase in the share of unproductive expenditures (national defense, social policy) reduces it. The maximum positive effect comes from expenditures on the national economy: their increase by 1% of GDP with constant total expenditures increases the growth rate of GDP by 1.1 p.p. An increase in expenditures on education by 1% of GDP with constant total expenses contributes +0.8 p.p. to the growth rate of GDP. The corresponding effect of healthcare expenditures is +0.1 p.p. Defense and social spending make negative contributions: –2.1 and –0.7 p.p. respectively. These results are consistent with existing estimates of fiscal multipliers for Russia and calculations based on data from other countries and cross-country data.
Purpose:
This article studies the effects of public expenditure on economic growth in Latin America countries (LAC), especially the role played by foreign aid and public and private investment
Design/methodology/approach:
Granger causality approach and Fixed effect method.
Findings:
There is bidirectional causality between investment climate improvement, domestic investment and economic growth. Also, private investment, population growth rate, investment climate improvement and corruption reduction lead these countries economic growth.
Research limitations/implications:
In these countries, to manage economic growth governments have to pay attention on population growth rate , level of corruption, domestic and private investment
Originality/value:
There are numerous studies regarding the impact of public spending on economic growth, but this study focus on developing countries especially on one area which is Latin America Countries. Also, it shows that ,additionally to private investment ,domestic investment, population growth rate and corruption are economic growth determinants in this area.
This paper examines the link between the transport infrastructure and the economic performance in the EU-28 countries, over the period of time 2000–2014, using panel data methods. Firstly, we aim to provide the theoretical background of the transport infrastructure development, public sector performance and economic growth. The paper’s key point is the detailed look at the components of transport infrastructure, analyzing the implications of the policy-makers based on a production function and in order to test the policy implication, factor analysis is also employed. The results show significant effects from transport infrastructure components even after institutional and other factors are controlled for. From the path analysis results, the study confirm the alternative hypothesis, outlining the unidirectional long-run causality relationship between growth, transport infrastructure and Public Sector Performance. Transport infrastructure status (measured thought index of transport) has significant impact on economic development with coefficient estimate. The public performance indicators influence the way to economic growth. On the one hand, the corruption, the regulatory environment, size shadow economy, infant mortality, income inequality, inflation and unemployment rate negatively affect the economic growth, and on the other hand there is a strong positive relationship between the quality of the judiciary, education achievement, life expectancy and economic growth.
This paper examines the relationship between the compositions of government expenditure and economic growth. It develops an endogenous growth framework drawing on variables from existing models, and separates government expenditure into productive and non-productive forms. Using panel data from 37 high-income and 22 low- to middle-income countries covering 1993–2012, our findings are based on OLS fixed effects and GMM techniques. We challenge much of the existing empirical literature in relation to developing economies by showing that a shift in government expenditure away from non-productive government expenditure and towards productive forms of expenditure are associated with higher levels of growth in both high-income and low- to middle-income economies. Moreover, we identify the differing components of government expenditure that are most associated with increased long-run output levels in both high-income and low- to middle-income economies.
This study aims to investigate government spending on infrastructure. Both primary and secondary data are used for the study. The secondary data comprise of reported annual spending on selected infrastructure and annual Gross Domestic Products for 1980 to 2016 for Nigeria. The data treatments used for the secondary data are unit root and co- integration tests using Augmented Dickey–Fuller and Phillip–Perron model. Weighted least square was used to test the sample of 37-year annual time series using vector error correction model. For the primary data, a sample of 242 respondents is utilised for the study. Statistical random sampling was used for the sample selection. The data analysis was done with descriptive statistics. Findings from the study indicate that government spending on transport and communication, education and health infrastructure has significant effects on economic growth; spending on agriculture and natural resources infrastructure recorded a significant inverse effect on economic growth in Nigeria. An element of fiscal illusion was observed in the government spending on agriculture and natural resources indicating that government is not contributing as much as the private sector in spending on agriculture and natural resources infrastructure in Nigeria.
Purpose
The research attempts to provide more reliable estimates of the relationship between government spending and economic growth in the EU during the period of 1995 – 2015.
Design/methodology/approach
The methodology consisted of several different stages. In the first stage for an assessment of dynamics of government spending and economic growth indicators over two decades, descriptive statistics analysis was employed. Correlation analysis helped to identify relationships between government expenditures and economic growth. In the third stage, for modelling the relationship and the estimation of causality between government expenditure and economic growth, Granger causality testing was applied.
Findings
The research indicated that eight EU countries have significant relationship between government spending and economic growth.
Research limitations/implications
This study has been bounded by general government expenditure and economic growth only. The breakdowns of general government expenditure on the basis of the activities they support have not been considered in this paper, which is the main limitation of the research. Despite the limitation, it might be maintained that the research highlights key relationships in the EU countries.
Originality/value
These insights might be useful for policy makers. In countries with unidirectional causality running from government expenditure to economic growth, government can employ expenditure as a factor for growth. The governments should ensure that resources are properly managed and efficiently allocated to accelerate economic growth in the countries with unidirectional causality from GDP to government expenditure.
This paper provides new evidence of the impact of government spending on economic growth in the European Union countries. Governments can adjust their levels of spending in order to influence their economies, although the relationship between these variables can be positive or negative, depending on the countries included in the sample, the period of estimation and the variables which reflect the size of the public sector. The results obtained based on regression and panel techniques suggest that government expenditure is not clearly related with economic growth in the European Union countries over the period 1994-2012.
The present study examines the long run relationship between social expenditures and economic growth in Asian developing countries. The paper seeks to examine the long run impact of expenditures in social sector such as education health and social security/welfare along with fiscal deficit/surplus on economic growth in case of ten Asian developing countries including Bangladesh, India, Indonesia, Korea, Malaysia, Pakistan, Philippine, Singapore, Sri Lanka, and Thailand. In this study empirical analyses suggest the existence of long run dynamic relationship among expenditures on education, health and social security welfare along with fiscal deficit/surplus on economic growth for all cases of sample countries. Panel cointegration analysis also supports the existence of long run dynamic relationship among variables under study for panel of sample countries. According to analyses the study concludes that expenditures in the social sector can affect economic growth. Such social expenditures enhance productivity by providing infrastructure, education, health and harmonizing private and social interests. As a result expenditure composition can also play an important role in promoting economic growth: fiscal adjustment that reduces unproductive expenditures and protects expenditures in social sector has proved to be more sustainable and more likely to result in faster growth.
This study attempts to empirically examine the trends as well as effects of government spending on the growth rates of real GDP in Nigeria over the last decades (1970-2008) using econometrics model with Ordinary Least Square (OLS) technique. The paper test for presence of stationary between the variables using Durbin Watson unit root test. The result reveals absence of serial correlation and that all variables incorporated in the model were non-stationary at their levels. In an attempt to establish long-run relationship between public expenditure and economic growth, the result reveals that the variables are co integrated at 5% and 10% critical level. The findings show that there that there is a positive relationship between real GDP as against the recurrent and capital expenditure. It could therefore be recommended that government should promote efficiency in the allocation of development resources through emphasis on private sector participation and privatization\commercialization.
Noting that the literature has focused on the link between the level of public expenditure and growth, we derive conditions under which a change in the composition of expenditure leads to a higher steady-state growth rate of the economy. The conditions depend not just on the physical productivity of the different components of public expenditure but also on the initial shares. Using data from 43 developing countries over 20 years we show that an increase in the share of current expenditure has positive and statistically significant growth effects. By contrast, the relationship between the capital component of public expenditure and per-capita growth is negative. Thus, seemingly productive expenditures, when used in excess, could become unproductive. These results imply that developing-country governments have been misallocating public expenditures in favor of capital expenditures at the expense of current expenditures.
In this paper, we examine the growth effects of government expenditure for a panel of 30 developing countries over the 1970s and 1980s, with a particular focus on disaggregated government expenditures. Our methodology improves on previous research on this topic by explicitly recognizing the role of the government budget constraint and the possible biases arising from omitted variables. Our primary results are twofold. First, the share of government capital expenditure in GDP is positively and significantly correlated with economic growth, but current expenditure is insignificant. Second, at the disaggregated level, government investment in education and total expenditures in education are the only outlays that are significantly associated with growth once the budget constraint and omitted variables are taken into consideration. Copyright © 2007 The Authors; Journal compilation © 2007 Blackwell Publishing Ltd and The University of Manchester.
The nonrivalry of ideas gives rise to increasing returns, a fact celebrated in Paul Romer's recent Nobel Prize. An implication is that the long-run rate of economic growth is the product of the degree of increasing returns and the growth rate of research effort; this is the essence of semi-endogenous growth theory. This review interprets past and future growth from a semi-endogenous perspective. For 50+ years, US growth has substantially exceeded its long-run rate because of rising educational attainment, declining misallocation, and rising (global) research intensity, implying that frontier growth could slow markedly in the future. Other forces push in the opposite direction. First is the prospect of “finding new Einsteins”: How many talented researchers have we missed historically because of the underdevelopment of China and India and because of barriers that discouraged women inventors? Second is the longer-term prospect that artificial intelligence could augment or even replace people as researchers. Throughout, the review highlights many opportunities for further research.
Expected final online publication date for the Annual Review of Economics, Volume 14 is August 2022. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.
Generally, public spending on education, research, and development (R&D) is perceived to impact the economy and sustainability positively; however, such notion lacks evidence, particularly in Belt and Road Initiative (BRI) member countries. In this study, panel data of BRI member countries from 2008 to 2018 is analysed using the generalized method of moments (GMM) method and data envelopement analysis (DEA) to assess the relationship between public spending on R&D and green economic growth and energy efficiency. The study found a fluctuating green economic growth indicator during the research period attributed to the non-serious nature of government policies. The findings reveal that the GMM method confirms both composition and technique effects in the entire sample. Nonetheless, the result of the sub-sample showed a heterogeneous effect on high GDP per capita countries. Moreover, the study shows that public spending on human resources and R&D of green energy technologies prompts a sustainable green economy through labour and technology-oriented production activities and different effects in different countries.
This study examines the asymmetry phenomenon in government spending-growth nexus in ECOWAS.The study adopts the System Generalized Method of Moment within the framework of panel data analysis as proposed by (Arellano & Bover, 1995; Blundell & Bond, 1998) which addresses the issue of potential endogeneity of fiscal variables through the use of internal instruments , and follow in the footsteps of Hatemi-J (2011, 2012), Granger and Yoon (2002) to separate negative shocks from positive shocks to government spending. In addition, we adopt Driscoll and Kraay's nonparametric covariance matrix estimator, to account for cross-section dependency and crosscountry heterogeneity inherent in empirical modelling.Our findings reveal that there is evidence of asymmetry in the government spending-economic growth nexus in ECOWAS over the period of study. We find that the response of economic growth to government spending shocks differs according to the nature of shocks on them. More specifically, the cumulative effect of expansionary government spending shocks on economic growth is positive and statistically significant. While the cumulative effect of a contractionary government spending exerts a negative and statistically significant impact on economic growth. Also, we found strong evidence of the existence of an inverted "U-shaped" relationship between government spending and economic growth.
In this study, we provide empirical evidence on the incentive role of official promotion from the perspective of managing economic growth targets. Using a manual dataset of economic growth targets in 230 Chinese cities during 2003–2016, we find that economic growth targets of governments curb public service expenditure on education, science and technology and this distortion results in the stagnation of human capital and technological progress, constraining long-term economic growth. When the growth target size of cities exceeds that of higher-level governments or if governments overfulfill their growth target tasks, then public service expenditure will decrease. We interpret the empirical findings as evidence that promotion evaluation based on economic performance distorts the composition of public expenditure, hinders sustainable economic development, and even accelerates the start of an economic downturn. Our study adds significant evidence to the theoretical literature emphasizing that the official evaluation system and public service could affect business cycle.
The green economy is considered as an efficient way for sustainability, but the connection between fiscal spending and green economic growth has not been systematically explained. This paper attempts to fill this research gap. Based on the panel data of 282 prefecture-level cities from 2005 to 2016, we first construct the green economic growth index by using the non-radial direction distance function. Then, by employing the System-GMM estimation, we further evaluate the effect of fiscal education spending and R&D spending on green economic growth. Finally, we explore the potential mechanism and discuss our findings. We obtain the following conclusions: (1) The green economic growth index fluctuated in the study period, we attribute it to the “political tournament” of local governments. (2) The System-GMM estimation results confirm the existence of composition effect and technique effect in the full sample, but the sub-sample analysis suggests that there is a heterogeneous effect in different areas with different resources abundant degree. (3) Mechanism analysis illustrates that fiscal R&D spending and education spending foster the green economic growth through technological activities and human-capital intensive activities, respectively, but they exhibit distinct roles in different areas. Based on these findings, we propose some targeted policy suggestions for promoting green economic growth.
Purpose
Might a country’s economic growth performance differ depending on the evolution of its human capital? This paper aims to consider education as a channel for human capital improvement and then for economic growth. The authors hypothesize the existence of a threshold for education, after which point the characteristics of economic growth change.
Design/methodology/approach
To address this question, the authors turn from a linear framework to a nonlinear one by applying smooth transition specifications.
Findings
This empirical analysis for Spain points to the existence of nonlinearities in the relationship between education and economic growth at country level, for both secondary and tertiary education. Next, as different patterns emerge in different regions, the authors provide a regional analysis for a number of representative Spanish regions. The results show that both secondary and tertiary education matter for economic growth and that nonlinearities in this relationship should be taken into account.
Practical implications
What is learnt from using Smooth Transition Regression models for the education-economic growth link is that the educational level of the population can be understood as a source of nonlinearities in the economic activity of a country (and of a region). Thus, depending on national and regional educational levels, economic growth behaves differently.
Originality/value
Although the importance of nonlinearities has been identified, linearity is usually assumed in this field of the literature. This paper calls into question the linearity assumption by using time series techniques for 1971-2013 in Spain, an OECD country, and testing whether the results at country level hold for different regions within Spain as a robustness check.
There is now a vast literature on the effects of the various functional components of public spending on growth. This contribution focuses on the effects of the composition of public spending on growth with reference to France for the period 1870-2010. Using a new database we show that the only functional component of expenditure that clearly contributes to the growth of French output is the expenditure which is aimed at the protection of property rights. Public interventions in support of the economy, on the other hand, have no impact on growth. In the area of social spending, only health expenditure contributes to output growth. In the case of France the empirical evidence therefore seems to confirm not only the crucial importance of the protection of property rights highlighted by neo-institutional theory, but also Smith's minimal state hypothesis: the restriction of the size of the state and the delimitation to its essential functions tends to favour output growth.
This paper attempts to investigate the relationship between government expenditure and taxation with GDP per capita growth in developing countries in Asia. Panel regression is used for a sample of twenty one Asian countries covering data 1981-2005 periods. Panel regression is used for three different sub panel regressions. Results suggest that positive relationship between government expenditure and GDP per head growth, negative relationship of taxation with GDP per head when all countries included in the regression. Initial GDP per head is positively related with GDP per head growth but insignificant in some cases. Investment, physical capital and labor force growth rate is positively affect GDP per head growth, results also supports negative relationships between GDP per head growth and unemployment. Results suggests that government expenditures are growth inducing, larger size of government will certainly create opportunities of employment and hence growth and subsequently higher per capita income. Lower tax rates or burden along with resource mobilization through non tax revenue will certainly be growth inducing.
The literature on the relationship between the size of government and economic growth is full of seemingly contradictory findings. This conflict is largely explained by variations in definitions and the countries studied. An alternative approach – of limiting the focus to studies of the relationship in rich countries, measuring government size as total taxes or total expenditure relative to GDP and relying on panel data estimations with variation over time – reveals a more consistent picture. The most recent studies find a significant negative correlation: an increase in government size by 10 percentage points is associated with a 0.5% to 1% lower annual growth rate. We discuss efforts to make sense of this correlation, and note several pitfalls involved in giving it a causal interpretation. Against this background, we discuss two explanations of why several countries with high taxes seem able to enjoy above average growth. One hypothesis is that countries with higher social trust levels are able to develop larger government sectors without harming the economy. Another explanation is that countries with large governments compensate for high taxes and spending by implementing market‐friendly policies in other areas. Both explanations are supported by ongoing research.
Previous studies generally find mixed empirical evidence on the relationship between government spending and economic growth. In this paper, we re-examine the causal relationship between government expenditure and economic growth by conducting the panel Granger causality test recently developed by
[23] and [24] and by utilizing a richer panel data set which includes 182 countries that cover the period from 1950 to 2004. Our empirical results strongly support both Wagner's law and the hypothesis that government spending is helpful to economic growth regardless of how we measure the government size and economic growth. When the countries are disaggregated by income levels and the degree of corruption, our results also confirm the bi-directional causality between government activities and economic growth for the different subsamples of countries, with the exception of the low-income countries. It is suggested that the distinct feature of the low-income countries is likely owing to their inefficient governments and inferior institutions.
This paper addresses the question whether public finance reform can affect trend growth in the EU-15. Focusing on time series patterns, we investigate whether there have been persistent trends in economic growth and fiscal variables over the last 40 years. In addition, we estimate a distributed lag model, which 1) indicates that government size measured either with total expenditure or revenue shares, government consumption and direct taxation negatively affect growth rates of GDP per capita, while public investment has a positive impact, and 2) provides robust evidence that distortionary taxation affects growth in the medium-term through its impact on the accumulation of private capital.
The causal link between government expenditure and economic growth in Egypt over the period from 1952 to 2020. Systematic Reviews in Pharmacy
- M G Mostafa
Mostafa M. G. The causal link between government expenditure and economic growth in Egypt over the period
from 1952 to 2020. Systematic Reviews in Pharmacy. 2021;12(3):231-243. DOI: 10.31838/srp.2021.3.38
Causal relationship between government size and economic development: An empirical study of the U
- A Islam
- A Nazemzadeh
Islam A., Nazemzadeh A. Causal relationship between government size and economic development: An
empirical study of the U. S. Southwestern Economic Review. 2001;28:75-88. URL: https://swer.wtamu.edu/sites/
default/fi les/Data/SER 2001%20Islam%20Nazemadeh%2075-88.pdf
savings challenge: Policy options for productivity and growth
- D W Jorgenson
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