Impacts of public spending on economic growth in Dong Thap province

Abstract

The study examines the effect of public spending from many perspectives on economic growth and vice versa in Dong Thap province. The Granger causality theory and the VAR autoregressive vector model of real GDP (GDPR) were used to test the causal relationship between public spending and provincial economic growth. Time series data from 1995 to 2020 were collected from Dong Thap Provincial Statistics Office. The research results show that: aggregate public expenditure has no Granger relationship with GRDP but is significant in the opposite direction; GRDP has a positive effect on overall public spending - economic growth increases the scale of public spending; development investment spending has no Granger relationship with GRDP but recurrent spending has a positive effect on GRDP. However, in the opposite direction, GRDP does not have a Granger relationship with recurrent expenditure but has a Granger relationship with development investment spending. The study also found that private investment and growth in labor size have a positive effect on GRDP. The author has proposed a number of significant solution groups based on the investigation’s findings. The first solution is to allocate budget resources so that the recurrent expenditure proportion can account for an increasing proportion in the structure of public expenditure. The second option is to create an environment that encourages private investment. For instance, perfecting mechanisms and policies on attracting private investment; socializing, attracting, and establishing favorable conditions for the private sector to participate in the delivery of public services; encouraging and assisting the private sector to make investments in cutting-edge research, development, and technology transfer. The third option is to put more of an emphasis on human resource development, with a particular emphasis on educating top-notch human resources to meet the province's development needs. In the upcoming years, boosting training and labor support services through procedures and policies as well as financial support from the budget will also have a significant positive impact on output volume.