Human Development and Government Expenditure in Asian Countries: An Empirical Study

Abstract

This study examines the impact of public spending on human development in Asian countries, considering both investment and current spending. The empirical method is a system-GMM, using a dataset of 35 Asian countries collected from 2005 to 2014 by the Asian Development Bank (ADB) and the United Nations Development Programme (UNDP). The findings indicated that government spending, both investment and current spending, had effects on the human development index, but these effects are not linear. Depending on the type of expenditure, the detected threshold effect is U-shape or inverted U-shape. According to this study, government spending could adversely impact human growth if the optimal expenditure thresholds are broken. These findings have significant implications for enhancing the effectiveness of public expenditure to improve the human development index. This study also provides meaningful lessons that are especially pertinent for Asian countries, including Vietnam.