Components Of Public Expenditure Research Articles

An empirical analysis using new instrumental variable methods of distributional effects of corruption on public expenditures in developing countries.

The online version contains supplementary material available at 10.1007/s43546-023-00452-1.

How Does Public Health Investment Affect Subjective Well-Being? Empirical Evidence from China.

Maximizing or improving residents’ subjective well-being is one of the basic purposes of public expenditure. As an important component of public expenditure, the impact of public health investment on residents’ subjective well-being receives considerable attention. Regarding the empirical evidence, this paper measures residents’ subjective well-being from the perspectives of overall cognitive happiness, life satisfaction, positive emotions and negative emotions, on the basis of a multi-level structural model of subjective well-being. Factor analysis is used to estimate the subjective well-being of residents at the province level in China, based on the China Family Panel Studies of 2018. In addition, structural equation modeling is employed to explore the impact of public health investment and its regional disparity on the subjective well-being of residents. The empirical results show that public health investment has a significant positive effect on residents’ subjective well-being. Moreover, there is an inverted U-shaped relationship between the regional disparity of public health investment and residents’ subjective well-being. Further study illustrates that the effects of public health investment and its regional disparity on residents’ subjective well-being are heterogeneous by group. Public health investment has a greater impact on the well-being of low- and middle-income, eastern and urban residents than high-income, midwest and rural residents.

Public expenditure and capital formation: Evidence from Nigeria

The paper examined the relationship between public expenditure and capital formation in Nigeria, 1981-2018.Adopting the Ordinary Least Square Multiple Regression, the study revealed a significant relationship exists between public expenditure and capital formation in Nigeria. Also, the model indicated that three of the public expenditure components namely, total public expenditure on economic services (TES), total public expenditure on social and community services (TSC) and total public expenditure on transfers (TT) were statistically significant with all the explanatory variables meeting the a priori expectation with their positive coefficients. Based on the findings, the study concluded that public expenditure has positively contributed to the level of capital formation in Nigeria, thus the study recommended that proper monitoring should be placed on public expenditure on administration. This recommendation stems from the insignificant contribution of this component of public expenditure; that could be a pointer to misappropriation from this particular component. Overall, these results lend further credence to the Law of increasing state activities by Wagner and his contemporaries.

THE CAUSAL RELATIONSHIP BETWEEN PUBLIC EXPENDITURE AND ECONOMIC GROWTH IN INDIA: VECM ESTIMATION

The relationship between public expenditure and economic growth is obvious, but the direction of the causality is not clear. This paper analyses the relative impact of the different components of public expenditure on economic growth. Specifically, this paper examines whether the level of government expenditure is managed to accelerate economic growth or whether the government expenditure is used excessively which may hurt the domestic economy because of increased taxes and/or high government borrowing. The vector error correction method is applied to the annual time series data for India from 1983 to 2020 for testing the long and short-run causality. The pair-wise Granger causality test indicates one-way causality moving from gross domestic product to total government expenditure and from gross domestic product to government revenue showing that the growth of the economy leads to an increase in both government revenue and expenditure. The estimated error correction coefficient is significantly negative indicating that the speed of adjustment between the shortrun dynamics and the long-run equilibrium is about 0.03%. The results show a stable long-run relationship between public expenditure and economic growth.

Ekonomik Özgürlük Bileşenleri Arasındaki İlişkilerin Çok Boyutlu Ölçekleme Analizi ile Değerlendirilmesi

Ekonomik özgürlük, bir ülkenin hem ekonomik hem de teknik ve sosyal boyutların gelişmesinde anlamlı bir rol oynamaktadır. Bu kapsamda ülkelerin ekonomik özgürlük performanslarını artırmaları büyük önem arz etmektedir. Uluslararası alanda ülkelerin ekonomik özgürlük performanslarını ölçen çeşitli endeksler bulunmaktadır. Söz konusu endekslerden bir tanesi araştırmalarda çok sık olarak faydalanılan Heritage Kurumu Ekonomik Özgürlük Endeksi’dir. Bu endeksin bileşenlerinin birbirlerini pozitif yönde tamamlayıcı özelliği bulunmaktadır. Ayrıca ülkelerin söz konusu bileşenleri birbirlerini ilişkilendirecek faaliyetler yapması, ülkelerin kendi ekonomik özgürlük performanslarının artırmalarına neden olabilmektedir. Bu kapsamda araştırmanın amacı, 2020 yılı için ekonomik özgürlük performansı en yüksek olan ilk 100 ülkenin Heritage Foundation Ekonomik Özgürlük Endeksi bileşenlerinin değerleri üzerinden bileşenlerin ilişkisel yapısını Çok Boyutlu Ölçekleme Analizi ile tespit etmektir. Analize göre, vergi yükü ve kamu harcamaları bileşenlerinin diğer bileşenlere olan uzaklıkları çok fazla olduğu tespit edilmiştir. Dolayısıyla vergi yükü ve kamu harcamaları bileşenleri ilişkisel yapıya katkı sağlamadığı belirlenmiştir. Buna karşın mülkiyet hakkı, yargı etkisi, finansal özgürlük ve devlet bütünlüğü bileşenleri diğer bileşenlere olan ortalama yakınlıkları fazla olduğu için ilişkisel yapıya en fazla katkı sağlayan bileşenler olduğu gözlenmiştir. Buna göre öncelikli olarak ülkelerin genel anlamda ekonomik özgürlük performanslarını artırmaları için vergi yükü ve kamu harcamaları bileşenlerinin diğer bileşenleri ilgilendirecek ve onlar ile pozitif yönde ilişki sağlayacak faaliyetler yapmaları gerektiği sonucuna ulaşılmıştır.

Türkiye de Kamu Harcamaları ve İşsizlik Arasındaki Nedensellik İlişkisi

Providing full employment in the economy enable achieving macro-economic targets more easily. For this reason, achieving the full employment target is of great importance for all countries. One of the top priorities of governments in ensuring economic stability is to prevent unemployment. Various policies are implemented for this purpose. However, policies that are not based on empirical studies are considered with suspicion. In this study, the relationship between unemployment and public spending in Turkey were determined by Granger causality test. The parameters of the model were estimated by establishing a multiple linear regression model. In the model, the unemployment rate is taken as dependent variable and Public Expenditure components as independent variables. The data belonging to the quarters between 2000 and 2018 was analyzed with EViews 9.0 software. Findings obtained as a result of the analysis showed that public spending is an important factor in reducing the unemployment rate and there is a strong correlation between the investment expenditures and the unemployment rate. As a result, it has emerged that policies that will create new production capacities and increase the growth rate should be implemented.

Fiscal policy in the US: a new measure of uncertainty and its effects on the American economy

We use the dispersion of the Federal Budget Balance forecasts from Consensus Economics to construct a new measure of fiscal uncertainty; constant horizon forecasts are obtained through mixture distributions. The scheme we propose has several advantages over previous uncertainty measures. First (as opposed to recent proposals), it results in a forward-looking measure, which implies that any sudden development in terms of an (un)expected fiscal stance is immediately incorporated in the series. Second, the measure is by construction a real-time one. Third, being completely model-free, it is not contaminated (inflated) by model uncertainty. Fourth, our measure does not simply track uncertainty stemming from public consumption and investment, whereas it is comprehensive in also accounting both for the critical welfare component of public expenditure and for taxes. Fifth, as opposed to uncertainty indexes which can be interpreted only dynamically, our measure has an obvious intuitive point-wise interpretation. Interestingly, the inception of the Trump administration has led to unprecedented uncertainty shocks which have demonstrably put a non-negligible brake on the slow US recovery. More generally, we show that fiscal uncertainty shocks have clear recessionary effects. Furthermore, constraints on monetary policies during the ZLB have likely strengthened the recessionary effects of fiscal uncertainty shocks.

Nexus between Globalization and Public Expenditure Components: Case of EU Countries

1980’lerden itibaren devletin ekonomideki payının azaltılması ve piyasa mekanizmasına işlerlik kazandırılması amacıyla özelleştirmelere hız verilmiştir. Küreselleşme bir yandan, ülkeleri kamu sektörünün payını azaltma ve piyasaları genişletme seçeneği ile karşı karşıya bırakırken diğer taraftan küreselleşmeye uyum sağlamak amacıyla vergi rekabeti başta olmak üzere ekonomik ve mali alanda yapılan serbestleştirici politikalar kamu bütçesine önemli yükler getirmekte ve kamu harcamalarının kompozisyonunu önemli derecede etkilemektedir. Bu düşünceden hareketle 28 AB ülkesi için küreselleşmenin kamu harcamalarının alt bileşenleri olan genel kamu hizmetleri, savunma harcamaları, kamu düzeni ve güvenlik, eğitim, sağlık ve sosyal koruma harcamaları üzerindeki etkisi incelenmiştir. Panel ARDL yönetimi kullanılarak 2001-2017 dönemi verileriyle yapılan analiz sonuçlarına göre küreselleşme, kamu düzeni ve güvenlik, eğitim, sağlık ve sosyal koruma harcamalarını pozitif yönde etkilerken genel kamu hizmetleri ve savunma harcamalarını ise negatif yönde etkilemektedir.

Public Expenditure and Economic Growth in India: An Empirical Analysis Using Vector Autoregression (VAR) Model

Objective – The objective of this study is to test direction of causality between components of public expenditure and economic growth in India. Methodology/Technique – The paper uses annual data for the period 1980-2015. To measure public expenditure, plan expenditure and non-plan expenditure are used. The econometric methodology employed is Vector Auto regression (VAR) model. Findings – First, the stationary properties of the data were tested using Augmented Dickey-Fuller (ADF) test, Dickey-Fuller (DF) test, and the Phillip-Perron (PP) test and found that variables were non-stationary in level, but stationary in first differences. Then, Johansen- Jueslius cointegration test was employed to test the long-run association among the variables and results suggest an absence of any long-run association between plan expenditure and non-plan expenditure and economic growth in India. The Granger Causality test suggests there is unidirectional causality running from economic growth and non-plan expenditure and plan expenditure and non-plan expenditure and absence of causality public expenditure and economic growth. Novelty – The results of the Forecast Error Variance Decompositions test indicated that innovations in the variables are mostly explained by their own shocks. The impulse responses of the economic growth, plan expenditure and non-plan expenditure with respect to identified shocks are consistent with the results of Variance Decomposition Analysis. Type of Paper: Empirical. JEL Classification: O4, O49, O53. Keywords: Plan Expenditure; Non-plan Expenditure; Economic Growth; Unit Root; Cointegration Test; Granger Causality Test; Forecast Error Variance Decomposition; Impulse Responses. Reference to this paper should be made as follows: Gupta, R; Shastri, S. 2020. Public Expenditure and Economic Growth in India: An Empirical Analysis Using Vector Autoregression (VAR) Model, J. Bus. Econ. Review 5(2) 45– 58 https://doi.org/10.35609/jber.2020.5.2(1)

Fiscal policies in a monetary union: the eurozone case

We argue that the institutional framework of the eurozone was designed to deny a role for fiscal policy. However, the Great Recession of 2008–2009 forced governments to intervene, mainly to avoid the collapse of their financial systems. At the same time, the severe recession implied a decrease in tax revenues, and an increase in some components of public expenditure – such as unemployment benefits, which implied an increase in public deficits. When the crisis seemed to be over, the Maastricht rules gave priority to restoring fiscal targets, even at the cost of prolonged unemployment and stagnation in countries like Greece and Italy. Using the three-balances approach pioneered by Godley, we argue that such policies require the achievement of an external surplus, or else fiscal austerity will worsen the financial position of the private sector. We show that this is indeed how most eurozone countries moved, and argue that such policies are fragile, and possibly not sustainable in the medium term. We suggest the introduction of fiscal currencies as one way of introducing a degree of freedom in the sustainability of the eurozone.

How does public spending affect technical efficiency? Some evidence from 15 European countries

AbstractThe relationship between government size and economic growth has been widely debated. Revisiting the subject from a distinct angle with respect to the mainstream approach, we provide an empirical analysis of the impact of government size on technical efficiency. The aim of this paper is to estimate the impact of public sector's size and of public expenditure components on 15 European countries’ technical efficiency from 1996 to 2014 by using a True Random Effect model. Using the total public expenditure as a proxy for the government size we estimate simultaneously national optimal production function and technical efficiency by controlling for income distribution and institutional quality. Our main findings show that the effect of public sector's size on efficiency is positive while the type of public expenditures may have both positive and negative impact. In more details, results suggest that education and health expenditures have a positive effect on technical efficiency, while others have a negative impact.

Pattern of Government Recurrent Expenditure and Economic Growth in Nigeria

The main objective of this study is to examine the effects of recurrent expenditure components; namely, Administration, Social and Community Services, Economic Services and Transfers, on economic growth in Nigeria. The VAR methodological framework is employed while the empirical data cover from 1981 to 2016. The results show that while GDP responded positively to a one standard deviation shock to recurrent expenditure on administration, it responded negatively to a one standard deviation shock to recurrent expenditure on both social community services and transfer. GDP has almost zero response to a one standard deviation shock to recurrent expenditure on economic services. The results further show that most of the GDP shock are due to own effect. Compared to other components of recurrent expenditure, the relative contribution of recurrent expenditure on transfer to GDP innovation is highest in the second period while the relative contribution of recurrent expenditure on administration is highest in the third and fourth periods. However, the Granger Causality test shows that recurrent expenditure components none has a causal impact on GDP both individually and collectively. Therefore, the Keynesian view that public expenditure is a veritable fiscal tool for promoting and enhancing economic growth is not supported. The policy implication of our findings is that Federal government can only achieve the desired growth in economic activities using fiscal policy if the recurrent expenditure component of public expenditure is reduced. Further, the proportion of recurrent expenditure that is allocated to economic services should be increased while the proportion that is allocated to bot social community services and transfer should be decreased.

The Impact of Public Expenditure Components on Economic Growth in Ethiopia; Vector Autoregressive Approach

The study analyzes the impact of public expenditure components on economic growth in the Ethiopian economy using annual time series data for the period 1982-2016. The study uses public expenditure variables from economic infrastructures (agriculture, road and energy), social infrastructure (education) and recurrent and capital expenditure components. With the help of co-integration and vector error correction analysis, the impact of various areas of public expenditures was assessed in the long-run as well as in the short-run. The study found that public expenditure components at all have a significant positive effect on economic growth in the long-run but they have insignificant impact in the short-run except education and road. Expenditure on education and road has both short-run and long run effects on economic growth. The impact of educational expenditure on economic growth is highly significant and positive which have powerful role in promoting the country’s economic growth compared to other variables. In the short run the impact of education on economic growth is negative and significant whereas that of road expenditure is significant and positive. Based on the results of the co-integrated and vector error correction model, this study found that, it is better and advisable to have an excessive expenditure on education and road construction than other areas of public expenditure, so as to accelerate economic growth in Ethiopia.

How Does the Public Spending Affect Technical Efficiency? Some Evidence from 15 European Countries

The relationship between government size and economic growth has been widely debated. Departing from this issue, we provide an empirical analysis of the impact of government size on technical efficiency. The aim of this paper is to estimate by using a True Random Effect model the impact of public sector’s size and of public expenditure components on 15 European countries’ technical efficiency from 1996 to 2011. Using the total public expenditure as a proxy for the government size we estimate simultaneously national optimal production function and technical efficiency model by controlling for income distribution and institutional quality. Our main findings show that the effect of public sector’s size on efficiency is positive while the type of public expenditures may have both positive and negative impact. In more details, results suggest that social protection, cultural, and health expenditures have a positive effect on technical efficiency, while others have a negative impact. More controversial is the impact of education expenditure, even if a positive effect on efficiency prevails when controlling for heteroscedasticity.

The dynamic effects of public expenditure shocks in the United States

This paper estimates the dynamic aggregate effects of exogenous shocks to two key components of public expenditure in the United States, government income transfers and government spending. The identification strategy positions the structural shocks to public expenditure in an SVAR framework with exogenous measures of public expenditure changes. Transfers shocks are based on a new narrative variable of legislated increases in U.S. social security benefits. I demonstrate that shocks to different types of public expenditure do not have the same macroeconomic impact. The estimated government spending multiplier is between 0 and 1, while increases in transfers generate a multiplier effect above 1.

Functional components of public expenditure, fiscal consolidations, and economic activity

AbstractThis paper analyses how the functional components of public expenditure and spending‐driven consolidations affect the economic growth, unemployment, and income inequality. A dynamic panel data least squares dummy variable estimator estimator is employed over a sample of 15 European Union countries during the period 1990–2012. The empirical results show that real GDP growth decreases when fiscal austerity measures are implemented, especially if they are spending‐driven. Cuts in public expenditure undermine economic growth, namely if they slash spending on public order, recreation, and education. Spending cuts on education, in particular, affect the investment in human capital, harming not only growth but also economic, social, and human development. The unemployment rate also proved to be significantly boosted when austerity measures restrict spending on education, whereas income inequality rises when social protection expenditures are cut.

Compositional Changes in Public Expenditure and Economic Growth: Time Series Evidence from Pakistan

The role of government in achieving economic growth through its fiscal policy, particularly spending policy cannot be overlooked. Investigation of public spending policy and its transmission mechanism to sustainable growth is imperative to the ultimate objective of welfare maximization. This study aims to identify the growth-oriented components of public expenditure as it seems useful to know the contribution of each component of spending towards the objective of economic growth. The study adopts the Kocherlakota and Yi's (1997) model as modified by Colombier (2008) to carry out the empirical analysis. To this end, ARDL is employed on annual data that ranges from 1973 to 2014 to estimate both the long-run and short-run dynamics between public expenditure composition and economic growth in Pakistan. The results indicate that public development expenditures are growth-oriented, while current expenditures reduce economic growth. Thus sustainable economic growth and sustainable development can only be materialized by changing the composition of public spending in favor of development expenditure. Since Pakistan is in the dire need of infrastructure and energy, therefore, allocation of more funds to Public Sector Development Programs (PSDP) are expected to add directly to growth on one hand and set a crowding-in effect for private investments—thereby enhancing growth indirectly—on the other hand

The Role of Public Expenditures in Economic Growth at Provincial Level: Empirical Study in Vietnam

The literature analyzes the relationship between public expenditures and GDP growth in localities of Vietnam. The research sample includes data on public expenditures and GDP of 63 provinces/cities of Vietnam during the period 2013 - 2015. The results of the research by backward regression method have confirmed the orthodromically directly proportional relationship between components of public expenditure, but not the total public expenditure, and GDP growth in provinces/cities of Vietnam. Specifically, public expenditure on development investment and the one on social and economic services contribute significantly and positively to the economic development of localities. On this basis, we propose some relevant recommendations to state agencies in establishing constitution for cutting down expenditures; strengthening estimate, public debt management performance; as well as measures to attract investment to contribute to fulfilling the tasks of industrialization, modernization in the era of global integration today.

Public Expenditure Interactions of Chinese Local Governments: A Simultaneous Equations Network Approach

ABSTRACTFiscal competition, mimicking, and interactions among local governments exist as a complex network. To better model and estimate public expenditure interactions of Chinese local governments, we adopt a simultaneous equations network approach in which spatial dependence of multiple components of local governments’ spending and also the internal competition among different components of public expenditure within the same city are considered. Using Chinese county-level fiscal data, we find that the endogenous peer effect for capital construction expenditure is positive among Chinese local governments, capital construction expenditure and administrative expenditure are complements rather than substitutes, there is no fiscal mimicking of social welfare expenditure, and there is a strong crowd-out effect of administrative expenditure on social welfare spending.

Countries Military Expenditures: Definitions and Determinants

Since the beginning of civilization, every country has always been interested to know the defence system of the other countries and are making constant efforts to make a well-built and efficient defence system than the other nations. Thus, the size and the pattern of military expenditure of a country does not depend only on its GDP or financial capability; in addition it depends on various other factors. All these factors may be identified as economic, non-economic, internal, external, political, geographical, geopolitics and geostrategic factors among others. All these factors are playing a vital role in determining the size and the composition of the military expenditure of a country. Military Expenditure is the amount of financial resources allocated by a nation to maintain armed forces and other essential services for defence purpose. Military expenditures are one of the most critically observed components of public expenditure. The standard definitions of military expenditure have been proposed by some international organizations and research institutes that are involved in the study of the defence sector. In this issue, one of the vital problems is how to define military expenditure or which public expenditure should be a part of military expenditure, further what are the main determinants of the military expenditure of a country.