Abstract
This paper offers an empirical examination of the relationship between government spending’s, income inequality, and economic growth by using the case of 19 Asian countries from 2002 to 2017. For this purpose, the paper uses robust difference-GMM estimation and panel granger causality test. We found that gross domestic investment and regulatory quality are the main variables that contribute to these countries' economic growth. While current government consumption reduces economic growth. Also, government expenditure on education and regulatory quality granger cause economic growth in these countries. However, the effect of government expenditure on education on economic growth is not significant. So, to increase their economic growth, this study recommends these countries' governments to encourage gross domestic investment, maintain regulatory quality and reduce their current consumption. This study also concludes that income inequality has no impact on these countries' economic growth for this period.
Highlights
In recent decades, Asia has become a region of extremes: China is home to two companies (Alibaba and Tencent) which are valued at more than $1 trillion; while four of the world’s five most expensive cities are in Asia, with Hong Kong topping the list
These results indicate that it is not government expenditure into education and income inequality that lead these countries economic growth, but gross domestic investment (GFCF), regulatory quality and current government consumption, so governments have to encourage gross domestic investment and regulatory quality and reduce current government expenditure on their policies to increase economic growth
We can say that our results, instead of inequality or expenditure on education highlightednewcontributors to economic growth, in particular private investment and governance indicator
Summary
Asia has become a region of extremes: China is home to two companies (Alibaba and Tencent) which are valued at more than $1 trillion; while four of the world’s five most expensive cities are in Asia, with Hong Kong topping the list. “Highly skilled workers with more education see their incomes rise, while low-skilled workers see their wages reduced,” noted a recent report by the Asian Development Bank. This gap is at its highest level in decades for developed economies, while the inequality trend has been rising in many developing countries. In Asia, despite recent economic growth, income distribution has been worsening as well. According to the World Bank’s World Development Report 2017, public policy implementations have to generate development outcomes such as security, growth, and equity
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