Changes In Government Expenditure Research Articles

GOVERNMENT EXPENDITURES ON HOUSEHOLD CONSUMPTION – LEVEL, CHANGES, AND THEIR RELATIONSHIP WITH SOCIO- -ECONOMIC DEVELOPMENT INDICATORS IN EUROPEAN COUNTRIES

Aim: The aim of this article is to examine changes in government expenditures on household consumption in European countries and the relationship of these expenditures with socio-economic indicators. Methods: The study is based on data analysis from 36 European countries, using the Eurostat database and various rankings such as the Happiness Index, Human Development Index, Sustainable Development Goals, and Social Progress Index. The analysis focused on the trends in government expenditures on household consumption and aimed to explore the association between these expenditures and socio-economic indicators. Results: Significant changes in the share of government expenditures on household consumption in the GDP were observed among the studied countries during the period from 2011 to 2022. Some countries increased their expenditures, while others decreased them. Cluster analysis revealed four groups of countries based on the share of government expenditures on household consumption in GDP. Conclusions: There was no direct correlation between the level of government expenditures on household consumption and socio-economic indicators among the studied countries. Instead, variations in socio-economic development were observed among different groups of countries, regardless of the level of government expenditures on household consumption.

The aggregate and distributional effects of fiscal stimuli

This paper compares the aggregate and distributional effects of three fiscal policy instruments: government expenditures, unemployment benefits, and transfers. To this end, the canonical model of frictional labor market is embedded into an otherwise standard incomplete markets framework where firms face price-adjustment costs. The model calibrated to match the moments characterizing the US economy successfully replicates the empirical distributions of households across: disposable income, consumption expenditures and net worth. The analysis quantifies the aggregate and distributional responses to changes in government expenditures, unemployment benefits, and transfers. Moreover, the stabilizing role of the analyzed fiscal measures is evaluated.

Unregulated economic activities and the environment: The role of fiscal policies

African countries are characterized by high unofficial activities, coupled with a fiscal structure that could either undermine or promote these activities to affect the environment. This study examines the direct and indirect environmental impacts of the unregulated economy and the fiscal instruments of government expenditure and tax using the panel quantiles regression technique. Driven by data availability, our analysis covers 46 countries when the fiscal variables are not considered, while 41 and 38 countries are respectively included in the models involving government expenditure and tax revenue from 2000 to 2016. We discover that the direct impact of unofficial economic activities is unfavourable on the environment, as it increases carbon emissions. The direct impacts of the fiscal policies are heterogeneous. The environmental effect of government expenditure changes from favourable to unfavourable as the countries move from low to high emissions levels. On the other hand, tax is only environmentally friendly in countries with moderate levels of emissions. The interactive effect of an unregulated economy and government expenditure worsens and improves the environment at low and high emissions levels, respectively. The results are heterogeneous for the interactive effect of unregulated economy and tax, although they are more biased toward a satisfactory impact on the environment at the extreme quantiles. Appropriate regulation of informal activities and the design of effective fiscal policy frameworks for environmental sustainability are policy derivatives of these findings.

Effect of Government Expenditure on Inflation in Nigeria

This study examined the effect of government expenditure on inflation in Nigeria while disaggregating expenditure into capital and recurrent. The study also examined the response of inflation to changes in government expenditure in Nigeria. Secondary data collected from the Central Bank of Nigeria Statistical Bulletin was employed for a period of thirty-eight years (i.e. 1981-2019). The Auto Regressive Distributed Lag technique was employed. For the first model explaining government capital expenditure, short run estimates reveal that in the current period, government capital expenditure has a significantly negative relationship with inflation. For government recurrent expenditure, it was established that government recurrent expenditure has a positive relationship with inflation. The impulse response test used in analyzing the effect of an unanticipated change in government expenditure (capital and recurrent) on inflation shows that the effects of the change in both cases are temporary as they are seen to revert to the mean. The study recommends that the government should maintain a good strategic balance between capital and recurrent expenditure to prevent the economy from being consumption - based.

Malaria control and elimination in Kenya: economy-wide benefits and regional disparities

BackgroundMalaria remains a public health problem in Kenya despite several concerted control efforts. Empirical evidence regarding malaria effects in Kenya suggests that the disease imposes substantial economic costs, jeopardizing the achievement of sustainable development goals. The Kenya Malaria Strategy (2019–2023), which is currently being implemented, is one of several sequential malaria control and elimination strategies. The strategy targets reducing malaria incidences and deaths by 75% of the 2016 levels by 2023 through spending around Kenyan Shillings 61.9 billion over 5 years. This paper assesses the economy-wide implications of implementing this strategy.MethodsAn economy-wide simulation model is calibrated to a comprehensive 2019 database for Kenya, considering different epidemiological zones. Two scenarios are simulated with the model. The first scenario (GOVT) simulates the annual costs of implementing the Kenya Malaria Strategy by increasing government expenditure on malaria control and elimination programmes. The second scenario (LABOR) reduces malaria incidences by 75% in all epidemiological malaria zones without accounting for the changes in government expenditure, which translates into rising the household labour endowment (benefits of the strategy).ResultsImplementing the Kenya Malaria Strategy (2019–2023) enhances gross domestic product at the end of the strategy implementation period due to more available labour. In the short term, government health expenditure (direct malaria costs) increases significantly, which is critical in controlling and eliminating malaria. Expanding the health sector raises the demand for production factors, such as labour and capital. The prices for these factors rise, boosting producer and consumer prices of non-health-related products. Consequently, household welfare decreases during the strategy implementation period. In the long run, household labour endowment increases due to reduced malaria incidences and deaths (indirect malaria costs). However, the size of the effects varies across malaria epidemiological and agroecological zones depending on malaria prevalence and factor ownership.ConclusionsThis paper provides policymakers with an ex-ante assessment of the implications of malaria control and elimination on household welfare across various malaria epidemiological zones. These insights assist in developing and implementing related policy measures that reduce the undesirable effects in the short run. Besides, the paper supports an economically beneficial long-term malaria control and elimination effect.

The Growth Effect of Government Expenditure in Jammu & Kashmir

Purpose : The paper examined the growth impact of aggregate government expenditure and its various components in Jammu & Kashmir using time series data from 1981–2020. At the disintegrated level, the study assessed the growth impact of government expenditure on three different types of services, namely, economic, social, and general. Methodology : The autoregressive distributed lag (ARDL) or bounds cointegration technique was used to explore the long-run relationship (cointegration) between total government expenditure and economic growth. The growth impact of government expenditure on economic, social, and general services was investigated using the regression model. Findings : The study found a cointegrating relationship between aggregate government expenditure and economic growth in the erstwhile state of Jammu & Kashmir. The ARDL estimates showed that total government expenditure impacted Jammu & Kashmir’s economic growth positively and significantly in the short and long run. Furthermore, the estimated regression coefficients revealed that government expenditure on social services impacted economic growth positively and significantly. In contrast, government expenditure on economic and general services had a negative but insignificant growth impact. Practical Implications : The study’s findings would assist the policymakers in prioritizing Jammu & Kashmir’s limited resources for developing sectors with the potential to raise economic growth. The study recommended that government expenditure on social services should be increased to enhance growth in the erstwhile state of Jammu & Kashmir. A compositional change in government expenditure favoring social services from general and economic services would stimulate economic growth in the former state of Jammu & Kashmir. The study’s main limitation is that the other potential growth determinants were not considered explanatory/control variables. Originality : The study provided empirical evidence of the growth effect of total government expenditure and its various types in one of India’s least developed, slow-growing, and resource-deficit states (now Union Territory). To the best of my knowledge, the growth impact of government expenditure on three different types of services (economic, social, and general) were not investigated empirically in Jammu & Kashmir for the period from 1981–2020. The study contributed to the scant empirical literature on the growth impact of government expenditure at the sub-national (state level).

Can government expenditure help reconstruct the Syrian economy in the post-conflict period? evidence from the SVAR and nonlinear ARDL models

ABSTRACT This paper explores the viability of the fiscal policy in the reconstruction of the Syrian economy. We use the Structural VAR estimation technique to assess the response of real GDP to shocks in government expenditures and exchange rates in the parallel market. We also control for other variables including money supply and oil prices. We find that government spending is an effective tool for economic recovery in particular under a quasi-fixed exchange rate regime. We also employ the nonlinear ARDL (NARDL) model to detect the existence of asymmetrical effects of government spending on real GDP. The NARDL results show that negative changes in government expenditure have more impact on economic growth compared to positive changes. Additionally, the NARDL model reveals that the post-conflict period was characterized by large government spending’ inefficiencies. Finally, we study three alternative government spending’ rebuilding scenarios. We document that reaching the pre-conflict GDP level is possible under two of the scenarios we investigate. Hence, our results provide strong policy implications according to which fiscal policy can, under specific exchange rate regimes, reverse the adverse effects of civil wars.

Management of public and private expenditures-CO2 emissions nexus in China: do economic asymmetries matter?

Environmental sustainability is becoming a crucial objective in this modern era. To attain this objective, it is important to reduce CO2 emissions for ensuring sustainable development. This study examined the nonlinear impact of government and household expenditures on CO2 emissions in China during 1984-2019. The modified nonlinear ARDL method is used for estimates. Asymmetric empirical outcomes show that a positive and negative change in government expenditure has reduced CO2 emissions in the short and long run in China. However, the positive and negative effects of government expenditure are higher in long run than short run. Furthermore, the asymmetric model gives much more significant results than the traditional symmetric model. Similarly, a positive change in household expenditure has a positive influence on CO2 emissions in the short and long run, while a negative change in household expenditure has a negative impact on CO2 emissions in the long run. The findings of the study recommended that there is a need to promote green spending in the economy that encourages environmental sustainability.

Designing a clean environmental framework for Pakistan: analyzing the nonlinear impact of aggregate demand drivers on CO2 emissions.

Aggregate demand in every country is one of the main components of macroeconomics, and Pakistan is no exception. This paper uses a fresh econometric framework to analyze the nonlinear impact of aggregate demand drivers on CO2 emissions in Pakistan by using a nonlinear ARDL approach over the data period from 1975 to 2019. The linear findings reveal that consumption and government expenditure indicates deteriorating effects on carbon emissions in long run in Pakistan. However, nonlinear findings revealed that positive change in government expenditure and trade has positive effects on carbon emissions. The positive change in investment has a negative significant and meaningful effect on the environment in Pakistan and asymmetric findings are also country-specific. Therefore, this study offers a few important policy implications for theorists, academics, and policymakers of Pakistan as well developing economies.

Life satisfaction and austerity: Expectations and the macroeconomy

We examine the linkages between fiscal austerity and life satisfaction across twelve European countries using a sample of repeated cross-sections of individuals from 1999 to 2014. Austerity policies may trigger several responses at both the macro and micro-level, which in turn may affect life satisfaction directly or indirectly. We employ mediation analysis to account for these complex relationships linking austerity to an individual’s life satisfaction, their economic expectations and their likelihood of unemployment. We find that austerity policies primarily affect individual life satisfaction via the economic expectations channel. Austerity dampens optimism about the future and this response has a negative effect on life satisfaction across a range of measures of economic expectations. In addition, our results suggest that changes in government expenditure, as opposed to taxation, matter for life satisfaction.

A quantitative analysis of sources of changes in government expenditures on health, 2000 to 2015: what can we learn from experience to date?

Background: Achieving universal health coverage (UHC) requires increased domestic financing of health by low-income countries (LICs) and middle-income countries (MICs). It is critical to understand how much governments have devoted to health from domestic sources and how much growth might be realistic over time. Methods: Using data from WHO's Global Health Expenditure Database, we examined how the composition of current health expenditure changed by financing source and the sources of growth in health expenditures from 2000-2015 across different income groups. We disaggregated how much growth in government expenditures on health from domestic sources was due to economic growth, growth in government spending as a share of GDP, and reallocations in government expenditures towards health. Results: Lower MICs (LMICs) and upper MICs (UMICs), as a group, saw a significant reduction in out-of-pocket expenditures and a significant growth in government expenditures on health from domestic sources as a share of current health expenditures over the period. This trend indicates likely progress in the pathway to UHC. For LICs, these trends were more muted. Growth in government expenditure on health from domestic sources was driven primarily by economic growth in LICs, LMICs, and UMICs. Growth in government expenditure on health due to increased government spending as a share of GDP was high in UMICs. For the high-income country group, where economic growth was relatively slower and government spending was already high with strong tax bases, the largest driver of growth in government expenditure on health from domestic sources was reallocation of the government budget towards health. Conclusions: Dialogue on domestic resource mobilization needs to emphasize overall economic growth and growth in the government spending as a share of GDP as well as the share of health in the government budget.

Note from the Editor

Note from the Editor

Political Business Cycles in Post‐Communist European Countries

This article analyses political business cycles (PBCs) in ten former European communist countries. The dataset used covers the period 1990‐2018. The results show that the PBCs manifest themselves in these countries through both fiscal and monetary policy. Changes in government expenditure during election times are found to be significant in reducing unemployment. Hence, it signals that there is a politically driven fiscal expansion. The results also show the importance of institutional quality in reducing the effects of the PBCs. The monetary policy models indicate that changes in money stock during and around election times affect the unemployment rate. Undertaking a subsample analysis of the non‐EU and EU members highlights the case that the membership of the EU is an important factor in preventing the development of PBCs.Related ArticlesHazakis, Konstantinos J. 2015. “The Political Economy of Economic Adjustment Programs in the Eurozone: A Detailed Policy Analysis.” Politics & Policy 43 (6): 822‐854. https://doi.org/10.1111/polp.12141Rogers, Chris. 2009. “The Politics of Economic Policy Making in Britain: A Re‐Assessment of the 1976 IMF Crisis.” Politics & Policy 37 (5): 971‐994. https://doi.org/10.1111/j.1747‐1346.2009.00207.xSager, Fritz, and Markus Hinterleitner. 2016. “How do Credit Rating Agencies Rate? An Implementation Perspective on the Assessment of Austerity Programs during the European Debt Crisis.” Politics & Policy 44 (4): 783‐815. https://doi.org/10.1111/polp.12165

Fiscal policy and economic activity in South Asia

AbstractThis paper analyzes whether fiscal policy in South Asia amplifies or smoothens business cycle fluctuations. It estimates several econometric models to explore the cyclicality of government spending and tax buoyancy. In South Asia, tax revenue increases less than one to one with changes in gross domestic product (GDP), but public spending increases more than proportionally. For each percentage point change in GDP growth, government expenditure changes by 1.3 percentage points. While changes in tax revenue have no significant impact on economic activity, the government spending multiplier is positive and significant: each additional US dollar (USD) of spending leads to an immediate increase in GDP of 0.2 USD and to an increase of 0.4 USD in the medium run. The impact of public spending on economic activity is entirely due to capital expenditure, which is also more procyclical. Procyclical public spending and a positive expenditure multiplier imply that fiscal policy in South Asia amplifies boom‐and‐bust cycles. These results are in line with those of other emerging markets and developing economies and robust to different model specifications and estimation strategies.

Does Equalization Transfer Payment Affect the Structure of Local Government Expenditure

The 1994 “tax-sharing” reform started under the background of a sharp decline in government financial resources and a weakening of macro-control capabilities. Although the income division between the central government and local governments has been well regulated, the premise of political centralization determines that China’s decentralization institutional reform will increase the central government’s financial concentration and macro-control capabilities as one of the reform goals. Under China’s fiscal decentralization system, the asymmetry between income decentralization and expenditure decentralization undoubtedly aggravated the mismatch of local governments’ financial resources and authority, which requires that the central government’s transfer payment plays a pivotal role in balancing intergovernmental fiscal relations.First, we construct the local government expenditure equation including the central government’s transfer payment in the Barro model framework, and then solve the optimal solution of the Cobb-Douglas production function considering the central government’s transfer payment and local government expenditure, thereby theoretically proving that the central government’s transfer payment has a non-linear effect on the structure of local government expenditure.Second, a panel quantile regression model is established to analyze the impact of the central government’s equalization transfer on the structure of local government expenditure, and the non-linear impact of the central government’s equalization transfer is verified. When the proportion of local governments’ productive expenditure is in the relatively low 10% and 25% quintiles, the growth of the central government’s equalization transfer payment will cause local governments to increase productive expenditure. However, when local governments’ productive expenditure accounts for more than a half, the impact of the central government’s equalization transfer payment on the structure of local government expenditure changes from positive to negative.After this, this paper takes the central government’s equalization transfer payment as the threshold variable, and further establishes a panel threshold quantile regression model to examine the impact of the central government’s equalization transfer payment proportion on the structure of local government expenditure.Constructing a new type of intergovernmental fiscal relationship which is compatible with incentives is not only conducive to accelerating the establishment of a modern fiscal system, but also related to the modernization of the national governance system and the improvement of governance capabilities. The above research conclusions of this paper not only have very important theoretical and practical significance for the construction of a new type of central-regional fiscal relationship with clear powers and responsibilities, financial coordination and regional balance in the new era, but also help to accelerate the establishment of a modern financial system.

Forward-looking agents and inflation in an oil-producing country: Evidence from Iran

A monetary model of inflation was estimated on the oil-producing country of Iran for the period 1984:1–2016:4. It was found that expectations are formed rationally and that agents are forward-looking and adjust their behavior based on changes in government expenditure. Consequently, it was found that higher fiscal variables result in lower price levels over the long run. A higher oil price leads to a lower price in the country but to a higher money supply and interest rate over the long run. Furthermore, a higher domestic interest rate results in a higher price level, while the reverse is true for a higher foreign interest rate. Another cause of inflation in Iran is the foreign price level. It was found that over the short run a higher growth of the real government expenditure results in a lower inflation rate in the country but a positive change in the foreign interest rate brings in a higher inflation rate.

Out of Sight, Out of Mind? Electoral Responses to Proximity of Healthcare

Existing work on electoral returns to public goods provision has investigated changes in government expenditure aggregated at levels that do not have any bearing on geographical access. In this paper, we focus on the political economy of the catchment areas of public services. Rather than investigating the binary relationship between public goods provision and electoral returns within formally drawn borders, we ask whether decreases in walking time to a public service attract votes for the incumbent. Leveraging the Family Medicine Reform in Turkey, which gave rise to an exogenous variation in voter proximity to the free health clinics in Istanbul, we find that communities whose walking distance to the closest clinic decreased voted significantly more for the AKP, the incumbent, between 2011 and 2015. We also show that poorer and healthcare dependent communities were more responsive to improvements in spatial accessibility to the local clinics.

A spatial equilibrium analysis of using agricultural resources to produce biofuel

In order to alleviate the potential damage from climate change and fulfil the requirements contracted in the Paris Agreement (COP 24), China has promulgated the mandatory regulation on ethanol-blend gasoline to reduce current levels of CO2 emissions. Since large-scale bioenergy development involves various aspects such as feedstock selection (energy crops, crop wastes), technology alternatives (conventional and cellulosic ethanol, pyrolysis), government subsidy (land use, energy crop subsidy) and carbon trade mechanism, an analysis that integrates economic, environmental, and social effects is necessary to explore the optimal biofuel strategy and social effects. This study proposes a price endogenous, partial equilibrium mathematical programming model to investigate how the selection of bioenergy crops and bioenergy technologies influences the amount of net bioenergy production, carbon sequestration, government subsidies, and cultivation patterns. We show that the conjunctive use of agricultural wastes can be an effective addition to current biofuel production. The results also indicate that at high gasoline and emissions prices, more land used for the energy crop program results in a significant change in government expenditure. In addition, net emissions reduction and emissions offset efficiency can vary substantially when different bioenergy techniques are adopted.

Effects of Public Expenditure on Gross Domestic Product in Zambia from 1980-2017: An ARDL Methodology Approach

The paper explored the fundamental changes in public expenditure and the resulting effect on the gross domestic product using an ARDL approach for time series data over the period 1980-2017. The control variables included foreign direct investment and current account balance. The objective was to determine changes which had occurred with regard to the performance of GDP since 1980. A quantitative method approach was used to ascertain the relationship between the variables and analysed using the E-views 9 software. Cointegration results showed a long run relationship between GDP and government expenditure. In this regard, changes in government expenditure have a strong converse effect on GDP. Government expenditure, which has increased significantly in the past decade, is seen to have had negative effects both in the short run and long run. Contrary to theory, increased government expenditure may not be ideal for growing the Zambian economy. This could be due to the allocation of this public expenditure, i.e. the 2018 Budget had 24% of the expenditure directed to economic activities. Thus it is recommended that government practice increased fiscal discipline or reallocated resources as their expansionary fiscal policies are not yielding the intended results. Additionally, policies to promote private investment may be more beneficial for the Zambian economy. On the other hand, increased investment is also recommended with government encouraging more investment promoting policies as FDI is observed to have a positive impact in the short run though insignificant in the long run. These should ensure more investors are encouraged to stay longer and the impacts/externalities of their investments be accrued to the nationals to ensure long run benefits. The Zambian government should also ensure that the country diversifies its export base and enhances its external debt management to ensure positive and consistent impact of Current Account Balance in the long run.

A quantitative analysis of sources of changes in government expenditures on health, 2000 to 2015: what can we learn from experience to date?

Background: Achieving universal health coverage (UHC) requires increased domestic financing of health by low-income countries (LICs) and middle-income countries (MICs). It is critical to understand how much governments have devoted to health from domestic sources and how much growth might be realistic over time.Methods: Using data from WHO’s Global Health Expenditure Database, we examined how the composition of current health expenditure changed by financing source and the sources of growth in health expenditures from 2000-2015 across different income groups. We disaggregated how much growth in government expenditures on health from domestic sources was due to economic growth, growth in government spending as a share of GDP, and reallocations in government expenditures towards health.Results: Lower MICs (LMICs) and upper MICs (UMICs), as a group, saw a significant reduction in out-of-pocket expenditures and a significant growth in government expenditures on health from domestic sources as a share of current health expenditures over the period. This trend indicates likely progress in the pathway to UHC. For LICs, these trends were more muted. Growth in government expenditure on health from domestic sources was driven primarily by economic growth in LICs, LMICs, and UMICs. Growth in government expenditure on health due to increased government spending as a share of GDP was high in UMICs. For the high-income country group, where economic growth was relatively slower and government spending was already high with strong tax bases, the largest driver of growth in government expenditure on health from domestic sources was reallocation of the government budget towards health.Conclusions: Dialogue on domestic resource mobilization needs to emphasize overall economic growth and growth in the government spending as a share of GDP as well as the share of health in the government budget.