Components Of Government Spending Research Articles

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

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.

On the determinants and interrelationship of components of government spending

AbstractThe paper examines the determinants and interrelationship of components of government spending using data for up to 142 countries over the period 1990–2017. We make use of two‐way fixed effect estimator with Driscoll‐Kraay standard errors, which accounts for cross‐sectional dependence and a system generalized method of moments estimator to examine the determinants of components of spending. We then adopt the seemingly unrelated regression estimation technique to examine the interrelationship between government spending types. From our results, there is little evidence of Wagner's Law as the coefficient of income is negative and statistically significant for most measures of spending. Further, we find that a reduction in overall government spending tends to reduce the share of almost all components of government spending except spending on economic services, non‐productive spending, and spending on transfers. In examining the interrelationship between government spending types, we find that government spending types under the Classification of Functions of Government (COFOG) classification, which may be described as “pure public goods” and “merit public good provision,” have complementary relationships. However, government spending on pure public good vs merit public goods, pure public goods vs economic services, and pure public goods vs transfers could be considered substitutes.

РИНОК ПРАЦІ В КОНТЕКСТІ ФОРМУВАННЯ ФІНАНСОВОЇ ПОЛІТИКИ СОЦІАЛЬНОГО РОЗВИТКУ

Economic processes in Ukraine are related to the world ones, and the chosen course to build a socially oriented market economy determines the importance of sustainable human development, which determines the adaptation of all areas of economic objectives and areas of application. Therefore, the implementation of financial policy should provide conditions for the formation of the welfare of citizens and the leveling of disparities in the market economy, in particular in relation to social inequality and property stratification. In the 21st century global social and economic development has acquired new features – intensive development of technology and innovation, increasing the importance of services, accelerated integration into globalization – due to the transition of most countries to post-industrial society, knowledge economy, the dominant factor capital, its creative beginning and talent, which is expressed through new ideas, views and concepts. Creative human capital, in turn, is at the heart of the creative class – a stratum of society engaged in science and technology, science and art, the result of which is the latest products. The concept of "creative class" appeared in parallel with the transformation of the Internet space into an integral part of life. Therefore, the creative class is often associated with the concepts of "network" or "virtual" class, those people whose daily lives are largely shaped by the practices of the constant presence of IT technologies. The study of current trends in the labor market and determination the direction of human capital and labor resources are very important for the formation and implementation of financial policy in the priority of social development and the formation of conditions to reduce social disparities. Although the labor market falls under the regulation of financial policy quite indirectly, in particular in terms of the level of minimum wage or tariff-level regulation, but the functioning of the labor market provides the potential for taxes and income as a basis for livelihoods and human capital. In addition, trends and directions that occur in the field of employment and the structure of promising jobs, determine the priorities of the social component of government spending, as well as form the potential for the production of GDP.

OIL PRICES SHOCKS AND GOVERNMENT EXPENDITURE

This study employs the vector autoregressive model (VAR), impulse response function and variance decomposition to study the impact of oil price shocks on components of government spending on both oil-exporting and oil importing countries over the period from 1980 to 2018. While the vast majority of previous studies focused on the impact of oil price shocks on government spending, this study emphasized the impact of these shocks on the current and capital government expenditure. It was found that oil price shocks affect government current expenditure positively in the two groups of countries. While it affects government capital expenditure positively in oil-exporting countries and negatively in oil-importing countries.Keywords: Oil-exporting countries, Oil-importing countries, Oil price, VAR model, government expenditures.JEL Classifications: H5, O13, Q43DOI: https://doi.org/10.32479/ijeep.11172

Impacts of productive and recurrent public expenditure on economic growth in South Africa: An analysis using the autoregressive distributed lag – error correction model

Orientation: The weak economic growth experienced by South Africa in the face of increased government spending is a concern. Research purpose: Investigating different components of government spending helps to observe their relationships with economic growth and conclude whether or not government spending contributes to the lower economic growth. Motivation for the study: Earlier studies in South Africa considered the effects of total government spending on economic growth; however, estimating this effect does not depict reality. Research approach/design and method: This study used annual data from 1976 to 2017 to observe this relationship. The autoregressive distributed lag bounds-test approach to cointegration and the ARDL-based error correction method were adopted. Main findings: The results showed that the two components of government spending positively affect economic growth in the short and long run. Government investment spending has a greater effect on economic growth in the long run than in the short run. The results showed that government consumption expenditure outweighs government investment expenditure, with the latter having lesser effect on economic growth. Practical/managerial implications: This shows that increased government spending is not to be blamed for the slow growth in South Africa, supporting theory. Contribution/value-add: Some studies did not disaggregate government spending into government investment and consumption spending in South Africa; and observed how each component affects economic growth; and other studies used econometric techniques that are different from the one used in the current study. This study therefore contributes to the ongoing discussion of the effect of government spending on economic growth.

ШЛЯХИ ОПТИМІЗАЦІЇ ДЕРЖАВНИХ ЗАКУПІВЕЛЬ В РЕСПУБЛІЦІ УЗБЕКИСТАН

Formulation of the problem. The article considers the quality issues of an important component of government spending – annual procurement. They are implemented for material and financial support of state infrastructure. The acquisition of goods, works and services in world development practice is important and is a continuous process aimed at the rational development of cash funds. In this regard, today there is an acute problem of increasing the efficiency of the public procurement system The purpose of the research is the definition of the main directions of public administration and administration in order to find ways to improve the efficiency of public procurement in the Republic of Uzbekistan. The object of research – the process of public administration in the country of state-owned objects, as well as ways to improve its efficiency. The methods used in the research – logical, comparative, analytical, scientific and methodological. The hypothesis of the research is the ways to improve the efficiency of public administration depend on the qualifications of management personnel and feedback from the local population. The statement of basic materials. The economic conversions which carried out in Uzbekistan have beck directed to dismantling of the institutes resisting to the market, and active formation of the new institutional struc-tures inherent in preferentially market public systems. Gradualness and sequence of the re-formatory steps excluding shock components for economy and population and providing a necessary social insurance of transformational risks are the feature of transformational model of Uzbekistan. The originality and practical significance of the research. The choice of model of public admin-istration in economy is inevitably connected by geopolitical priorities and ideas of the place of the country in the modern world. It means that exert impact on institutes of management and an assessment of management efficiency and political factors which are in turn subdivided on internal political are, first of all, support by the population of the idea of the state independence. Conclusions of the research. Further improvement of public admin-istration assumes improvement of legal base of administrative activity (from a position of in-terests of public servants), necessary guaran-tees and incentives, standardization of their activity as most complex, responsible and skilled work, and maximum informatization of administrative decisions. Such approach as-sumes formation of special legislation on pub-lic service, development of the quality stand-ards of state services, electronic forms of low-cost and transparent forms of interaction with economic entities and citizens.

Cyclical variation of the fiscal multiplier in Turkey

ABSTRACT This paper investigates the cyclical variation in the government spending multiplier for Turkey from 1990:q1 to 2015:q4. We use a time series model, namely the local projection method, to estimate the variation in the fiscal multiplier under two different regimes: low and high growth regimes with respect to long-term economic growth. Our results confirm that fiscal policy is more effective in times of low growth than high growth. Turning to the components of government spending, we find that the government investment multiplier is larger than the government consumption multiplier in both regimes. This evidence supports the view that an expansionary fiscal policy via public investment has a more profound effect on output than via public consumption. However, we also find evidence that the influence of government consumption on GDP increases substantially in times of low growth. We, therefore, suggest that policymakers use public investment rather than public consumption to stimulate the economy during economic expansion and increase public consumption during economic slowdowns.

Government Spending and Economic Growth in Cameroon

Today, the role of government spending which is considered as the main instrument in the promotion of economic development is seen in the public investment budget (PIB). This study analyzes the role of the public investment spending in the economic growth of Cameroon. Specifically, it brings out the effect of Public and Private Investment on GDP growth in Cameroon. The role of the PIB as an instigator of economic growth should be clarified in order to justify government investment expenditure. Many studies have analysed the relationship between government spending and economic growth but the analysis of the composition of government spending and induced economic growth is an aspect of economic analysis which deserves more interest. This study analysis the effect of government investment spending on economic growth in Cameroon going from the components of the GDP5 and using VAR (Vector Auto Regressive) model. Our results show the intervals in which the various components of government spending have an effect on economic growth in Cameroon. We find that the lagged GDP and government investments have a positive effect on growth whereas private investments affect it negatively.

Impact of Various Components of Government Expenditure on Economic Growth: Evidence from Developed and Developing Countries

The primary objective of the paper is to study how different components of government spending affect economic growth using panel data for 20 developed and developing countries from 2001 to 2014. The empirical results in this area of study are mixed. Two classifications of the government expenditure have been adopted-economic (current and capital expenditures) and functional (expenditure on defence, health, education and social protection). Panel data, both random effects (RE) and fixed effects (FE), have been estimated for developed and developing countries as well as for the pooled sample. Hausman specification test has been applied to select between the FE and RE model. Empirical estimates indicate that (1) according to the economic classification, current expenditures negatively affect economic growth, and the effect is significant for developed countries and pooled sample. The effect of capital expenditures is negative only for developing countries; however, the coefficients are statistically insignificant for all the three sets of countries. (2) As per the functional classification, defence expenditures negatively affect economic growth, and the effect is significant for developed countries and pooled sample. Government spending on health and education has a positive effect on the rate of growth of per capita income. However, the effect is statistically significant only for education, that too for developed countries and pooled sample. The impact of public spending on social protection is less clear for developed and developing countries. For the pooled sample, the effect is positive but insignificant. Empirical results suggest government expenditures if deployed conductively can be a significant determinant of economic growth.

Public Policy Against Political Frictions

Recent research has demonstrated that political distortions can increase macroeconomic volatility. The aim of this paper is to analyze a fiscal policy institution capable of reducing the influence of such distortions on politically-driven fluctuations. We introduce the distinction between mandatory and discretionary public spending in the political model of optimal fiscal policy. We show that the different legislative nature of these components of government spending leads to a divergent impact of mandatory and discretionary spending on macroeconomic volatility. Increasing the fraction of mandatory spending in total government spending reduces the politically-driven volatility of income taxes, total government spending, consumption, labor, and output. Increasing the fraction of discretionary spending has the opposite effect. Our findings are supported by empirical evidence.

Mandatory Spending, Political Polarization, and Macroeconomic Volatility

Political polarization combined with political turnover have been shown to amplify economic fluctuations (Azzimonti and Talbert, 2014). This paper analyzes a fiscal policy institution capable of reducing the volatility caused by these political frictions. We introduce the distinction between mandatory and discretionary public spending in a political model of optimal fiscal policy. We show that different legislative nature of these components of government spending leads to a divergent impact of mandatory and discretionary spending on politically-driven macroeconomic volatility. Increasing the fraction of mandatory spending in total government spending reduces the volatility; increasing the fraction of discretionary spending has the opposite effect. The presence of the legislative requirements behind the changes in mandatory public spending can explain simultaneous rise in political polarization and decline in the U.S output volatility after the 1980s.

The Government Spending Multiplier in Turkey

ABSTRACTThis study aims to measure the size of the government spending multiplier in Turkey for post-2001 financial crisis period within a structural VAR framework. The analysis demonstrates that a positive shock to government spending tends to increase output, tax, and real interest rate on impact and the size of the fiscal multiplier is relatively large at first few quarters. The fiscal multiplier reaches a peak value of 1.5 at second quarter and then starts to diminish. Furthermore, investigating the effects of the components of government spending reveals the fact that government investment expenditures, rather than consumption expenditures, have a profound impact on output at first few quarters.

Government Spending, Corruption and Economic Growth

There is considerable debate over the effects of both corruption and government spending on growth, but few studies have considered how the interaction between them might affect economic growth. This paper provides a contribution to the debate, starting wiGth an endogenous growth model and extending it to account for the effects of corruption on components of government spending, namely military and investment spending. It then illustrates the non-negligible indirect effects of corruption on military spending and government investment expenditure using model simulations. The resulting model is then estimated on a comprehensive panel of 106 countries and the results show that the interactions between corruption and investment and corruption and military spending have strong negative impacts on economic growth. The results also indicate important complementarities between corruption and military spending, suggesting that combating corruption will not only have direct positive effects, but is also likely to have positive indirect effects, through reducing the size of the negative impact of the military burden. They are also found to be robust across different measures of corruption, levels of economic development and groupings of countries. This suggests that policies to reduce corruption, combined with those to reduce military burdens, such as regional security agreements, would have a considerable impact on economic growth.

Government Spending, Shocks, and the Role of Legislature Size: Evidence from the American States*

ObjectiveI examine the relationship between legislature size and several components of government spending using a methodology that allows me to estimate how legislature size influences the fiscal response to shocks that are common to all states.MethodI use nonlinear least squares on a panel of 48 of the 50 American states over the period 1978–2008.ResultsI find little evidence that states with larger than average lower or upper chambers experience a larger change in spending per capita in the presence of a shock. I do find a positive relationship between lower chamber size and the first difference of welfare spending per capita, but this increase is partially offset by a negative relationship between upper chamber size and welfare spending.ConclusionThese results are consistent with the interest groups theory of government, which states that larger legislatures can be associated with lobbying and bargaining costs that may have offsetting effects.

Macroeconomic Effects of Fiscal Policy Shock in Nigeria: A SVAR Approach

This paper investigates the macroeconomic effects of fiscal policy shock in Nigeria using a Structural Vector Autoregressive (SVAR) framework on quarterly data for the period 1980:1-2010:4. From the empirical findings, the responses of real output and inflation may be asymmetrical depending on the component of government spending used as a fiscal stimulus to stabilized the economy. Basically, a positive shock to government capital spending on social and community services was found to have a persistent positive and significant impact on private consumption and real output but at the cost of higher inflation in the short term. A positive shock to oil revenue yield a significant positive impact on real output through its impact on public spending. In line with theory, the response of real output to innovations in business taxes is persistently negative, though insignificant. Private investment decisions in Nigeria does not seem to depend on the taxes paid to government, but on the cost of capital (interest rate) and perhaps on other crucial variables like market demand and profit expectations. The entire analysis clearly supports the argument that for the Nigerian experience, government is still relevant in stimulating real output through expenditure expansion on productive activities.

Government Spending, Shocks, and the Role of Legislature Size: Evidence from the American States

We examine the relationship between legislature size and several components of government spending using a methodology that allows us to estimate how legislature size influences the fiscal response to shocks that are common to all states. We find little evidence that states with larger than average lower or upper chambers experience a larger change in spending per capita in the presence of a shock. We do find a positive relationship between lower chamber size and the first difference of welfare spending per capita, but this increase is partially of set by a negative relationship between upper chamber size and welfare spending. These results are consistent with the interest group theory of government, which states that larger legislatures can be associated with lobbying and bargaining costs that may have offsetting effects.

The distributional impact of population ageing in New Zealand

This paper examines the potential distributional impacts of demographic change, particularly population ageing, and changes to labour force participation that are projected to arise over the next 50 years. The approach involves calibration weighting of the Treasury's microsimulation model, Taxwell, based on the New Zealand Household Economic Survey. The weights are adjusted for each projection year to ensure that a range of population aggregates (by age and gender) match the projected values provided by Statistics New Zealand. Measures of income inequality and poverty, along with the incidence of income tax, goods and services tax and a number of components of government spending (namely health and education) across age groups, are obtained. The results suggest that population ageing and expected changes in labour force participation, in isolation, do not have a significant impact on population-level measures of income inequality.

Evaluating the History of Fiscal Policy in the United States: A TVPSV-VAR Approach

This paper estimates how fiscal multipliers have changed over time using a time varying parameter model vector autorregressive model with stochastic volatility (TVPSV-VAR). First, I find that there is significant evidence that the multiplier has changed over time, once we control for changes in volatility, but that there is no empirical support to claim that the fiscal multiplier is bigger during a recession even if we consider different components of government spending. Second, I show that stochastic volatility plays an important role in the estimation of the model, and therefore, it should be taken into account when estimating VARs that include government spending or output. Finally, I show that government spending was extremely ineffective during the Great Recession of 2008, but taxes and transfer payments played an important role to stabilize the economy.

PP72 Does Investment in the Health Sector Promote or Inhibit Economic Growth?

BackgroundIs existing provision of health services in Europe affordable during the recession or could cuts damage economic growth? This debate centres on whether government spending has beneficial or perverse effects...

A Multivariable System Approach for the Assessment of the Influence of Fiscal Policy to Business Cycle Shocks

The authors consider a multivariable system comprising a set of macroeconomic variables as inputs, states and outputs. In this setting the authors assess the control potential of fiscal policy versus a large negative business cycle shock that affects the output of the system. The inputs considered for this matter are the cyclical components of government spending and taxes. The states are the cyclical components of consumption and investment. These variables convey information to the policy maker at each time period. The output of the system is the cyclical component of GDP. In order to assess the control potential of government fiscal policy we begin by solving an optimal control problem minimizing the deviations of log GDP from its trend subject to a multivariable system and a set of input - output inequality constraints. Based on the results obtained the authors propose a set of optimal control indicators used to evaluate the effectiveness of fiscal policy action against a large negative business cycle shock and the potential controllability of the system.