Increase In Government Expenditure Research Articles

Did Government Expenditure on the Grain for Green Project Help the Forest Carbon Sequestration Increase in Yunnan, China?

Reasonably assessing the effectiveness of government expenditure on the Grain for Green project (GFG) in providing forest carbon sequestration would contribute to the development of China’s forest carbon sequestration. Using the government expenditure data from the GFG in Yunnan Province from 2001 to 2015 and the MODIS Land Cover Type (MCD12Q1) time-series datasets, we calculated the forest carbon sequestration of various counties (cities or districts). The impacts of GFG government expenditure on forest carbon sequestration were empirically evaluated by the least squares dummy variables method (LSDV). The research results indicate that a 1% increase in government expenditure on the GFG yielded a 0.0364% increase in forest carbon sequestration. However, the effects of GFG government expenditure on forest carbon sequestration differed greatly in different areas because of the diversity of the natural environments, forest resource endowment, and government policies. If the initial forest endowment was not considered, the effectiveness of government expenditure on the GFG in providing forest carbon sequestration would have been overestimated. This study argues that, to improve the efficiency of GFG government expenditure in Yunnan Province, more investment should be made in regions with positive regression coefficients that have passed the significance t-test, such as Diqing Tibetan Autonomous Prefecture in the northwest, Baoshan City in the west, Honghe Hani and Yi Autonomous Prefecture in the south, and Wenshan Zhuang and Miao Autonomous Prefecture in the east.

Shadow economy and air pollution in developing Asia: what is the role of fiscal policy?

Asian developing countries face challenges of serious air pollution and large shadow economy. Fiscal policy is anticipated as a solution to cope with these obstacles. This paper empirically examines the impact of shadow economy on air pollution and the role of fiscal policy in moderating the impact through the two tools of government expenditure and taxation in 22 Asian developing countries during 2002–2015. The estimation results from the fixed effects and the system generalized method of moments show that air pollution is positively affected by the shadow economy; and expansionary fiscal policy can reduce air pollution through abating shadow economy, and can lessen the detrimental effect of shadow economy on the environmental quality. Specifically, the increase in government expenditure reduces the positive effect of shadow economy on air pollution, but a tax-hike intensifies it. It is also found a stronger negative impact of government expenditure, compared to positive impact of taxation, and a dominant impact of shadow economy on air pollution. The findings imply that policy-makers can use appropriate fiscal policies to control air pollution and to reduce the destructive effect of the informal economy on the environmental quality in developing countries. Especially, governments in developing countries should allocate more budgets on environmental projects in their fiscal reforms for the sake of moving to greener and more inclusive economies with low-carbon activities.

Defaulting on Covid Debt

The COVID-19 pandemic causes sharp reductions in economic output and sharp increases in government expenditures. This increases the riskiness of sovereign debts, especially in emerging economies. We propose a framework to study debt sustainability. The economy is subject to productivity and expenditure shock, the government sets distortionary labor taxes and decides whether to repay its past domestic and foreign obligations. Foreign default is more likely after a negative productivity shock, while domestic default is more likely after a negative expenditure shock. Recent proposals that would ease the burden of foreign debt after COVID-19, would not prevent a wave of domestic defaults.

Trade Promotion and the Impact on Economic Growth: An Evidence form A Panel Dataset

Marketing in general and trade promotion strategy, particularly, have to play an important role in promoting development of countries, especially of developing countries that seek to make exports as an engine for economic growth. This paper reviews the roles of marketing by investigating the impacts of trade promotion on development which is proxied by the growth rate of GDP. The authors test the hypothesis that the more spending of government on trade promotion activities leads to higher rate of economic growth. The study is applied for a sample of 30 countries including 15 developed and 15 developing countries in the period of 1970-2015. The results of a fixed effect regression model show that an increase in government expenditure of trade promotion leads to higher rate of economic growth in whole sample. Government expenditure of trade promotion also plays an important role on international trade. The estimation results also suggest that countries with higher levels of government expenditure on trade promotion activities will have higher degrees of its trade openness.

Changing public policy on expenditure in Namibia after independence and its impact on healthcare and education

In this paper, we examined whether changes in fiscal measures through increasing government expenditure on education and healthcare services adopted after independence has made significant impact on the welfare of the Namibian people. Time series data from Ministry of Finance, Ministry of Education of Government of Namibia, Namibia Statistics Agency and World Bank during the period between 1980 and 2015 has been used for the purpose of analysis. A comparison of growth in such expenditures, GDP and other human development indicators has been made between the pre- and post-independence periods. Finally, impacts of changes in healthcare and education expenditure on reduction in mortality, increase in life expectancy at birth, rising literacy and growth of people acquiring higher/technical education, etc. have been examined by using regression analysis. It is revealed that the Namibian people are better off now as compared to the pre-independence era. However, policy changes adopted at the time of independence has not been highly successful in transforming life of the Namibian people as expected. There are still a lot of scopes for the improvement of fiscal management in the country.

Protectionism and Economic Growth: Causal Evidence from the First Era of Globalization

We investigate how protectionist policies influence short-run economic growth. Our empirical strategy exploits an extraordinary tax scandal that gave rise to an unexpected change of government in Sweden. A free-trade majority in parliament was overturned by a protectionist majority in 1887. The protectionist government increased tariffs. We employ the synthetic control method to select control countries against which economic growth in Sweden can be compared. We do not find evidence suggesting that protectionist policies influenced economic growth and examine channels why. New tariff laws increased government revenue. However, the results do not suggest that the protectionist government stimulated the economy by increasing government expenditure.

Changing public policy on expenditure in Namibia after independence and its impact on healthcare and education

In this paper, we examined whether changes in fiscal measures through increasing government expenditure on education and healthcare services adopted after independence has made significant impact on the welfare of the Namibian people. Time series data from Ministry of Finance, Ministry of Education of Government of Namibia, Namibia Statistics Agency and World Bank during the period between 1980 and 2015 has been used for the purpose of analysis. A comparison of growth in such expenditures, GDP and other human development indicators has been made between the pre- and post-independence periods. Finally, impacts of changes in healthcare and education expenditure on reduction in mortality, increase in life expectancy at birth, rising literacy and growth of people acquiring higher/technical education, etc. have been examined by using regression analysis. It is revealed that the Namibian people are better off now as compared to the pre-independence era. However, policy changes adopted at the time of independence has not been highly successful in transforming life of the Namibian people as expected. There are still a lot of scopes for the improvement of fiscal management in the country.

Sectorial growth, Exchange rate and Fiscal policy in Developing Economies: The Interlinkages

The study examined the interdependence of sectorial growth, exchange rate and fiscal policy by simultaneous equation model for 50 developing economies over the time period of 2000 to 2014. Industrial GDP, service sector GDP, exchange rate, tax revenue are endogenous variables, while capital formation, foreign direct investment, trade, inflation, foreign aid, external debt and money supply are instruments. The study has 4 system of equations and estimated by simultaneous equations models (SEMs) through three-stage least squares (3SLS) estimator presented by (Zellner & Theil, 1962), the result of the study indicates that sectorial growth and fiscal policy have positive relation because tax exemption or reduction generate great impact on sectoral growth. Sectorial growth and exchange rate have a positive relation. The study also indicates that the exchange rate and fiscal policy are negatively related. An increase in government expenditure (spending) shows a decrease in the exchange rate. So the government of developing economies should increase revenues from non-tax sources instead of taxes, an increase in taxes decrease the exchange rate and ultimately increased in the sectoral growth.

Infrastructural Development and Economic Growth in Nigeria

This study examines the relationships between infrastructural development and economic growth in Nigeria using annual time series data spanning from 1981 - 2017. Research variables like Gross Domestic Product (GDP), Agriculture and Natural Resources (ANR), Roads Maintenance and Construction (RMC), Energy Supply (ENS) and Transport and Communication System (TCS) were used for the study. Philips-Perron unit root test (PP), Vector Autoregressive (VAR) estimation technique and Wald Bounds test were employed. The results of the study confirmed that there is positive correlation between infrastructural development and economic growth in the short-run in Nigeria. Based on the research findings, the study recommends that fiscal macroeconomic instruments should be employed to increase government expenditure on infrastructural development in order to achieve the economic developmental goal of the country. Keywords – Infrastructural Development, Economic Growth, Vector Autoregressive, Wald Bounds, Philips-Perron. DOI : 10.7176/JESD/10-24-07 Publication date: December 31 st 2019

Human Capital Development and Economic Growth in BRICS Countries: Controlling for Country Differences

This paper investigates the effect of human capital development on economic growth, as well as controlling for country differences, in the BRICS economies – from 1990 to 2017. Ordinary Least Square (OLS) and Generalized Method of Moments (GMM) were used as the estimation techniques. We use one-way ANOVA and Scheffe pairwise comparison tests to understand how human capital development differed between each pair of countries. Findings suggest that the effect of human capital development on economic growth, though significant, was limited in these countries. A comparative analysis of results showed that China, Brazil and Russia were able to utilise their human capital to enhance economic growth more efficiently than South Africa and India. Consequently, this study observed that a 1% increase in government expenditure on education would result in a 0.13% increase in GDP for China, a 0.06% increase in Russia, a 0.07% increase in Brazil, a 0.04% increase in South Africa, and a 0.01% increase in GDP in India. In addition, the study concluded that human capital development practices differ in all the countries. Although this result was previously implied in the literature, comparison of a comprehensive list of human capital development practices among countries was lacking. Overall, the paper argues that the classical theory of economic growth, in combination with the new theory, and also the theory of market value, will not only help sustain a strategy tripod, but also shed significant light on the most fundamental questions confronting human capital development and economic growth in many developing economies.

The Validity of Wagner’s Law in India: A Post-liberalisation Analysis

Aims: The present study attempts to analyse the behavior of government expenditure in relation to national income using most appropriate advanced econometric techniques to test the Wagner’s law of increasing State’s activity in Indian scenario during the post-liberalisation period of 1988 to 2017.
 Data: The study uses the IMF database entitled “International Financial Statistics” and World Bank database entitled “World Development Indicators” for testing Wagner’s law for the Indian economy.
 Methodology: The study employs appropriate econometric techniques to our model where government expenditure is used as regressand and gross domestic product and urbanisation is used as regressors. The study first investigates for unit roots in data using ADF and PP tests. Further, to investigate any co-integration among variables the study employed Johansen co-integration test. Once co-integration is confirmed, a vector error correction model has been estimated and lastly, Granger causality test is applied to check for any causality.
 Results: The results of Vector Error Correction Model reveal that both the Gross Domestic Product and the urban population have a positive and statistically significant effect on government expenditure in the long-run. Ceteris paribus, every 1.0 percent increase in GDP leads 0.36 percent increase in government expenditure. On the other hand, 1.0 percent increase in urban population leads to a 3.75 percent increase in government expenditure. The Granger causality results divulge that there is unidirectional causality running from urban population to government expenditure, whereas neither unidirectional nor bidirectional causality was found between GDP and public expenditure. In short-run, neither GDP nor urban population influences public expenditure.
 Conclusion: To sum up, the present investigation provides support for Wagner’s law in case of India in the long run only. It has been found that urbanisation has a greater impact on public expenditure than the national income (GDP) and which is also supported by Granger causality test showing significant unidirectional causality running from level of urbanisation to government expenditure.

Jurisprudence of Law, Poverty and Development

Poverty is the dearth of economic assets, which incapacitates to fulfill their basic needs. It is ultimately the shortage of the rights received from the law of nature along with the birth of human being. Global poverty is determined based on absolute income threshold equal to one or two dollar a day for World Bank Group. Although the measurement of poverty is difficult task, Kuznet Ratio, Lorenz Curve, Gini Coefficient, Coefficient of Variation, Theil index, Functional Distribution, Head Count Index, Poverty Gap Index, Foster-Greer-Thorbecke Measures, Human Poverty Index, Multidimensional Poverty Index, and Unemployment Rate are used for poverty measurement across the globe. State has to raise much toil to alleviate poverty. So, education, employment, income redistribution, entrepreneurship development, gender equality, development aid, debt relief, increase wage, natural resource mobilization, economic growth and increase government expenditures are used as the method of poverty alleviation. Social security like medical care; sickness benefit; unemployment benefit; old-age benefit; employment injury benefit; family benefit; maternity benefit; invalidity benefit; and survivors' benefit are used to protect minimum human dignity and existence of life. Nepal has Labour Act, 2074 BS (2017 AD), Labour Rules, 2075 BS (2018 AD), Contribution Based Social Security Act, 2074 BS (2017 AD), Contribution Based Social Security Rules, 2075 BS (2018 AD) as legislation applicable for social security purpose. However, these legislations are not applicable for government employee. Currently, government employee have separate standard for social security under Civil Service Act in the context of Nepal. Additionally, various approaches of development are coined to alleviate poverty across the globe. Moreover, peace is the benchmark of development, which gradually reduces poverty in society. As peace and development are interrelated; ultimate purpose of jurisprudence is to establish peace, justice, equality and rule of law in society. Finally, UN has coined Sustainable Development Goals to eradicate all form of poverty across the globe by 2030 AD. So, sustainable development is also the agenda of Nepal as it is the member of many international instruments of environment law. Country of the world cannot ignore environmental justice because it creates global problem as it is transnational in nature.

Is Government Spending at the Zero Lower Bound Desirable?

We build a medium-scale DSGE model and calibrate it to fit the main macroeconomic variables during the US Great Recession. Using it to evaluate the welfare effects of increasing government consumption at the zero lower bound beyond what was actually observed in the data, we reach three main results. First, the increase in government consumption after 2008, albeit small in present value terms, was close to optimal. Second, frontloading the same stimulus would have been welfare-improving. Third, larger welfare effects occur in our model for parameter values implying either large welfare costs of modest recessions (e.g., high consumption curvature), or outright large recessions. (JEL E12, E32, E43, E62, H50)

Do fisheries and aquaculture production have dominant roles within the economic growth of Pakistan? A long-run and short-run investigation

PurposeThe purpose of this paper is to investigate and explore the connection between aquaculture and capture fisheries production and economic growth in Pakistan. Fisheries play an important role in Pakistan’s national economy, and Pakistan has sufficient fishery resources to be developed. Most of the population in the coastal areas depends on fisheries for their livelihood.Design/methodology/approachThis research was based on time series data of aquaculture and capture fisheries production and the analysis of their relationship with economic growth in Pakistan. The study used an autoregressive distributed lag (ARDL) bounds testing approach to check the dynamic causality between the study variables.FindingsThe results showed that aquaculture and capture fisheries production have had a positive effect on the economic growth in Pakistan.Practical implicationsBetter infrastructure for the fishing industry, increased government expenditure on facilities and financial support for the fish farmers could contribute to economic growth in the future. Recommendations for improvements in these areas have been made.Originality/valueBy using an ARDL bounds testing approach, this study contributes to the literature regarding fisheries production and economic growth in Pakistan.

Economic Shocks and the Growth of the Construction Industry in Ghana Over the 50-Year Period From 1968 to 2017

The study analyses the relationship between the growth of the construction industry and economic shocks in Ghana over the 50-year period from 1968 to 2017 using an autoregressive modelling scheme that incorporates several economic shocks as separate independent variables. The independent variables used in the model included one positive economic shock and five negative shock variables. The positive shock variable was the sharply increased government expenditures on construction activities in selected years that allowed the government to host international events in Ghana within a period of two years. The five adverse economic shocks included in the model were political instability related to military coups, exchange rate depreciation of the local currency, Ghana cedi, with respect to the United States dollar, the average yearly temperature, aggregate electricity energy production shortfall related to a severe El Nino weather phenomenon, and incidence of extreme rainfall. The results of the analysis indicated that the most important factor influencing the growth of the construction industry in Ghana over the 50-year study period was political instability. Beyond political instability, the next most important factor was the purposely-driven sharp increases in government expenditures on construction activities for selected years that allowed the country to host international events in the country. The other significant economic shocks were the exchange rate depreciation, average temperatures, and electricity energy production shortfall; all three factors adversely affected the growth of the construction industry. The results of our study are generally consistent with those obtained from the literature concerning the positive and negative effects of economic shocks on the construction industry.

Energy and emission reduction efficiency of China’s industry sector: a non-radial directional distance function analysis

Nowadays, as China has become the factory of the world, China’s industrial sectors have become the country’s main source of energy consumption and emissions including CO2, SO2, NOx and soot. This article will use the non-radial directional dispersion function model (DDF) to explore ways to improve both the energy efficiency and the emission efficiency of China’s industrial sectors. Based on current research, this article proposes a new projected input for the treatment of industrial waste gas, and optimizes the projected input and output settings. The data analysis shows that there is room for improvement in China’s energy efficiency, and its regional imbalances have expanded. The Chinese government is urged to pay more attention to the improvement of energy efficiency in the central and western regions, and to provide more policy support. Simultaneously, the paper attemtps to establish measurement indexes to improve the efficiency of emission reduction. As a result, the authors suggest that increasing government expenditure can play a positive role in the overall improvement of emission reduction efficiency.

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.

Macroeconomic effects of fiscal policy in Pakistan: a disaggregate analysis

ABSTRACTThis study analyzes the macroeconomic effects of fiscal policy on macroeconomic variables in Pakistan. The study utilizes VAR framework and uses quarterly data of Pakistan from 1976Q1 to 2017Q4. The results showed that after an increase in government expenditures, private consumption and prices take three quarters to increase, while private investment follows the declining trend. Private consumption and interest rate are negatively related with taxes, while private investment and prices are positively related with taxes. Real GDP, private consumption and interest rate respond positively with an increase in developmental expenditure, public consumption and public investment. Private investment is negatively related with development expenditure, public consumption and public investment. An increase in direct tax as well as indirect tax leads to an increase in real GDP, private investment and interest rate, while private consumption takes three to five quarters to responds. Private investment and prices are positively related with non-tax revenue, while real GDP, private consumption and interest rate are negatively related. These results support the Keynesian view that government expenditure and taxes are useful tools to stimulate the economic activity, while crowding-out hypothesis holds in Pakistan as well. An active and efficient role of government is required for macroeconomic stability.

Evolving economic growth via the human capital development paradigm: Evidence from the Francophone West-African economies

Abstract. This research examined the impact of Human Capital Development (HCD) on economic growth among the ten French-Speaking West African Countries. In carrying out the empirical research, data were collected on human capital development and growth indices from countries in the sub region and panel data analysis was conducted. The period of analysis covered was between 1995 and 2017. Panel data analysis was used in capturing the relationship between human capital development and economic growth in the West Africa sub region. The endogeneity problem often associated with panel data analysis was accounted for through the use of the Generalized Method of Moments. From the Arellano-bond dynamic panel estimation, it revealed that secondary school levers (SSE6), those who enrolled for a minimum of four years at the tertiary school level (TSE4) and gross capital formation (GCF) were statistically significant in determining economic growth among the Francophone countries in West Africa. The Arellano-Bond dynamic panel results show the acceptance of the null hypotheses, which indicate that there is no significant relationship between economic growth and secondary school and tertiary school enrolment in Francophone West African sub region. From the result, emphasis should be devoted to vocational and functional technical education as well as Information and Communication Technology (ICT) and increase in government expenditure on health in the French-speaking West Africa sub region. Keywords. Human capital development, ICT, Economic growth, Generalized methods of moments, Variance inflation factor. JEL. F43, J24, O11.

Ignorance isn't bliss: Uninformed voters drive budget cycles

The paper shows that blissful ignorance does not apply to fiscal policy. In countries with uninformed voters, politicians attempt to ‘buy’ votes by substantially increasing government expenditures in election years. This generates budget cycles and costly macroeconomic fluctuations. Unlike much of the earlier literature that found this effect only in low-income countries or new democracies, we demonstrate that it has occurred in many prosperous countries with an established political system. In particular, constructing a comprehensive Informed-voter (INFOVOT) index and quantifying it for the 1995–2014 period, we show that only the top third of OECD countries with well-informed voters has not experienced political budget cycles. In contrast, the bottom third of OECD countries with poorly-informed voters has consistently seen a deterioration of the budget balance by 0.7–1.2% of GDP in election years. This represents an increase of 18–30% relative to their usual (non-election) budget deficits. Interestingly, for the intermediate group of countries with moderately-informed voters, for example Austria, France, Germany, Japan, Luxembourg, the U.K. and the U.S., election budget cycles occurred during the 1995–2008 period, but not since. We discuss why their election year deficit hikes (of 0.5–0.8% of GDP) may have disappeared after the Global financial crisis — drawing on the rational inattention literature. All our results are supported by a large number of robustness checks, including the use of a yearly version of the index (YINFOVOT). We conclude by offering some policy recommendations that may improve the voters' incentives to process fiscal policy information. As such, they could help to escape an ‘ignorance trap’ whereby uniformed voters choose politicians whose policies reinforce the voters' ignorance.