An Assessment of the Impact of Public Expenditure on Economic Growth in Azerbaijan

Abstract

How public expenditure affects economic growth, the state the level of its role in the economy is one of the topics that causes a wide discussion. This research work is dedicated to the investigation of the relationship between public expenditure and economic growth in the Republic of Azerbaijan on the eve of 2000-2021. The results show that, while the signs of the coefficients health expenditures (HE) and research expenditures (REX) are inconsistent with expectations about the relationship between GDP, those of education expenditures (EDEX), economic expenses (EXEC), and social protection and social security expenses (SPEX) are. This means that health and research expenditures are inversely related to economic growth and have a negative impact on it, whereas other expenditures such as education, economic and social expenditures have a positive impact on economic growth. Generally, the research shows that depending on the effectiveness of public expenditure, the relationship between public expenditure and economic growth can be positive or negative. This study adds to the growing body of evidence indicating that government spending is related to and has a significant impact on economic growth. In addition, the study concludes that the components of government spending examined in this study are important variables in explaining Azerbaijan's economic growth.