Government expenditure

Abstract: The causal relationship between government revenue and government expenditure is an important subject in public economics especially to the control of budget deficit. The purpose of this study is to investigate the relationship between government ...

This paper uses data from the Kingdom of Saudi Arabia (KSA) to empirically test Wagner's Law in explaining public expenditure growth in association with economic growth; and if this growth enhanced the public welfare. The Kingdom of Saudi Arabia (KSA) has witnessed a marked increase in government expenditure. We use the Engle and Granger (E-G) two-step cointegration method to examine the relationship between government expenditure and economic growth. Out of the four model specifications that we have tested, two models indicate that a positive long run relationship exists between government expenditure and economic growth. However, the income elasticities are not large enough to suggest that the growth in government expenditure exceeds the growth in national income; only that upward pressure is exerted. Looking at available data it is clear that governmental expenditures from GDP expansions increased public welfare for Saudis over the test period.

Income inequality has long been a frustrating feature of Malaysian economic development. The country income inequality, represented by the Gini Coefficient has decreased only slightly to 0.41 in 2014 from 0.51 in 1970. This income inequality, however, was accompanied by rapid economic growth. Gross Domestic Product (GDP) has grown by an average of more than 7 percent per year for 25 years or more. The expectations that the high economic growth would accompany low income inequality as hypothesized by the inverted ‘U-shaped’ Kuznets curve have not come true for Malaysia. Why did it occur? Unlike many other conventional studies which look at the relationship between growth and income inequality to explain this phenomenon; this study intent to looks at the foreign direct investment (FDI) relationship with income inequality. Since 1990s, FDI has been an important source of economic growth for Malaysia, bringing in capital investment, technology and management knowledge needed for economic growth. FDI had increased almost thirty-fold during 1970s to 2000s. There is a heated debate on the effects of FDI on income distribution. While FDI may have been good for development this masks the facts that not all types of workers necessarily gain from FDI to some extent. FDI induced skill specific technological change where it can be associated with skill-specific wage bargaining or skill-intensive sectors. This study presents an attempt to evaluate the impact of foreign direct investment (FDI) on income distribution among labors. The Malaysia’s Social Accounting Matrix (SAM) is constructed as a framework for the analysis. In this SAM the detail framework of the component of FDI in various sectors, production sectors and labour groups are essential to analyse different effects from different component of FDI on the labor’s income distribution among different labor group. This structure of SAM would answer the question of either and which component of FDI will benefit the most to the low income. The study finds that the FDI expansion has impacted negatively on the distribution of income across different labor groups, where it has increased the high-low or skilled-unskilled income inequality. It also indicates that there are differences in the composition of the FDI that impacts income distribution among labor. The apparent differences in the magnitude of the effects of the different FDI components suggests that variations in the FDI allocations among sectors should be considered as a possible policy variable to achieve income equality goals.

Ghana’s tax reforms constitute the major policy instrument needed to accelerate growth and poverty reduction. Over the past two decades, the government has consistently spent more revenue than it is able to generate and the gap is often financed with foreign aid which has perpetuated the country’s aid dependency. Two options can be explored to reduce the gap between government revenue and expenditure; generate more revenue or reduce government expenditure. Although the latter sounds reasonable, the government needs to spend more on key sectors like education, health and infrastructure if the country is to significantly reduce poverty. The critical issue has been how to generate the needed resources domestically, using tax instruments that are least harmful to the poor. This will obviously involve reforming the tax system to ensure efficiency by widening the tax net without necessarily increasing the tax rate. This paper provides an assessment of the changing structure of the tax sys...

This Impact Report identifies and summarises the diverse impacts, resulting from the £500m of UK funding of Science and Technology in 2013, using numerous quantitative metrics and short case study extracts.  It shows how the varied impacts of a national science and technology organization and its many funded programmes can be annually identified, captured, tracked, and summarised in a public document.

The report was produced for, and by, the Science and Technology Facilities Council (STFC) -  the UK Research Council responsible for funding: (1) all UK astronomy, particle and nuclear physics research, (2) related UK science and technology facilities (e.g. as Harwell and Daresbury), (3) the UK contribution to international science (e.g. CERN, international telescopes and space missions), (4) innovation and business spin-off programmes, and (5) UK public engagement activities.

The Report was co-researched and co-authored by the STFC Impact Team, including myself while Impact Evaluation Manager in 2013, with Dr. Claire Dougan-McCallie (lead author/Head of Impact) and Jenny Beard, with additional input from senior managers, and many data and case study contributions from other key managers across STFC.

Varied key impacts are identified and reported including:

• Research amongst the best (by citation impact) in astronomy, nuclear and particle physics.
• Supported research of 226 Principal Investigators in 70 universities, led to 1,100 peer-reviewed papers in 2012.
• Facilities (the Diamond Light Source, ISIS and CLF) were used in 2012/13 by over 4,200 unique users , in over 2,400 experiments, producing over 1,000 papers in peer-reviewed journals.

• Technology from CERN benefited the UK economy by over £100 billion every year.
• Funding the development of the UK’s space, internet and computer animation industries, returned over £500 billion to the UK economy per annum.
• Funded Innovation Campuses hosted over 230 enterprises and supported over 5,000 jobs.
• UK industry won £43 million in contracts from the international subscriptions funded, and had accumulated a total of £150 million since 2005.

• Funded research inspired future generations to study STEM subjects, attracting 90% of UK undergraduates to study physics, funded 782 PhD students  and 16,800 student training days.
• Between 2009 to 2012 public engagement programmes engaged people on 58 million occasions, with 2 million people engaged in face-to-face activities in 2013 alone.

Inspired by the idea of promoting equality opportunities across individuals can enhance economic growth through the allocation of human resource based on their best use, we examine the extent of inter-generational social mobility in Northern region of Malaysia. Using both descriptive and Ordinary Least Square (OLS) estimation, we analyze the possibility of income and occupation change of the poor households in rural areas. The findings demonstrate that both level of education and type of occupation reflect a significant improvement of inter-generational social mobility. Interestingly, the findings also indicate that social mobility in Malaysia is relatively higher than in other countries where more space and equal opportunities are enjoyed by all walks of life in the nation.

ABSTRACT
This study empirically examined the relationship between government health expenditure on economic growth in Nigeria using Gross Domestic Product (GDP) as a proxy to economic growth which is the dependent variable and the independent variables are Capital Expenditure on Health (CAPEXP) and Recurrent Expenditure on Health (RECEXP). The Error Correction Mechanism results showed that the system corrects to equilibrium at the speed of 43.40%. The study also employed the OLS regression analysis to estimate the model and the R2 showed a 94% significant relationship between government health expenditure and economic growth. The regression analysis results showed that the dependent variable (GDP) has; a positive and significant relationship with all the independent variables; every 1% unit increase in CAPEXP and  RECEXP will increase economic growth by 140.1217 units and 190.7144 units respectively. Good public health is vital in any country, not only for the purpose of maintaining a healthy populace but also as a matter of national security. In view of these findings, to ensure sustainable economic growth, it is recommended that there is the need for the Nigerian government to double its budgetary allocation to the health sector - through the setting up of good administrative/monitoring team, the utilization of disbursed funds meant for capital projects can be closely monitored, especially in the area of procurement; adequate and equitable distribution of healthcare facilities should involve the interests of all citizens especially those in the rural centres. And to ensure efficient service delivery by the health/medical practitioners or workers, the government should ensure prompt payment of salaries and wages and other benefits of the health workers (doctors, nurses, lap technicians etc), as this will go a long way in encouraging them to work more efficiently. Thereby, resulting in improved service delivery in the country.

Due to the deteriorating fiscal situation of the states, the Government of India has taken several initiatives, including the creation of a Fiscal Reform Facility, which sought to provide financial-grant incentives to the states, in order to encourage a movement toward budget balance over the five year period coinciding with the implementation period of the Eleventh Finance Commission (2000-2005). The

India is a Union of 28 States, two Union Territories with legislatures, and five Union Territories without legislatures. The 7th Schedule of India’s Constitution provides for a separate State List, which enumerates exclusive legislative and executive authority that lies with state governments. The State List entrusts major responsibilities in the areas of human and physical development to the states. These responsibilities require major expenditures by the states, but the tax revenue sources assigned to the states, although they have not been fully used, are not sufficient to meet these expenditure responsibilities. The resulting fiscal imbalances of the states is addressed through a complex system of intergovernmental transfers in various forms and through several other channels, including borrowings. Over the years, in practice, the States of India have sought to finance their increasing needs for expenditures through different forms of transfers from the Union Government and loan...

Foreign aid represents an important source of finance in most countries in sub-Saharan Africa (SSA), where it supplements low savings, narrow export earnings and thin tax bases. In recent years the donor community has become more stringent about fiscal discipline and good policies, which has led to freezing of donor funds to governments that do not conform with aid conditionalities. The Kenyan government has experienced such aid cuts in the past and this paper uses a welfare utility maximization function to explore how government expenditure responds to fluctuations in aid flows. The empirical results indicate that the flow of foreign aid does influence government spending patterns. There is a positive and statistically significant relationship between the share of government expenditure in gross domestic product (GDP) and the share of net disbursement of overseas development assistance (ODA). While the study finds relatively little evidence that aid leads to tax relief, there are s...

Government expenditure is an essential instrument for achieving full employment, price stability, improved standard of living, economic growth and other macroeconomic objectives. However, questions regarding the efficacy of government expenditures to attain these objectives have continued to rise due to the alarming rate of unemployment, inflation, poverty and other socioeconomic problems in Nigeria. This has called for the need to investigate the allocation of resources to some selected sectors and their resultant impact on the Nigerian economy. This study examined the effect of various components of Government Expenditures on Economic Growth in Nigeria for periods between 1981 and 2020. The analysis was based on Secondary data. The study adopted the Error Correction model and Granger Causality Test. The short-run model revealed that the components of government expenditures like recurrent expenditures on agriculture, health and education have an insignificant negative impact on economic growth. Recurrent expenditure on debt servicing and road and construction indicated a positive and negligible impact on economic growth. Concerning capital expenditures, government capital expenditures on social services were shown to have a negative and significant impact on economic growth. In contrast, government capital expenditures on economic services indicated a positive and insignificant impact on economic growth in Nigeria. In the long run, all the components of government expenditures employed showed a significant effect on economic growth. The research finding establishes no clear conclusion about whether Keynesian or Adolf Wagner's law is operational in Nigeria. The study concludes that the Nigerian economy is on the wrong path to sustainable growth and development. The study recommends that the government should increase its allocations to priority sectors like health, education, agriculture and infrastructures. Furthermore, the government should stimulate investment and output using monetary and fiscal policies to increase internally generated revenue and reduce government borrowing. Lastly, the study emphasises the need to improve government spending efficiencies, transparency in budgetary processes, and strict monitoring of government projects.

The impacts of public expenditures on economic growth have been revisited in this paper with respect to capital expenditure, recurrent expenditure and the government fiscal expansion in line with support for the budgetary allocations to various sectors in the context of the Nigerian economy. The Pesaran ARDL approach has been applied to carry out the impact analysis using annual time series data from 1981 to 2017. Empirical findings support the existence of a level relationship between public spending indicators and economic growth in Nigeria. Incisively, recurrent expenditures of government were found to be significantly impacting on economic growth in a negative way while the positive impacts of public capital expenditures were not significant to economic growth over the period of the study. Further results from the granger causality test reveal that fiscal expansion of the government that is hinged on debt financing is strongly granger causing public expenditures and domestic investment with the latter also granger causing real growth in the economy. We, therefore, provide some important policy recommendations following the results of the empirical analysis.

Las siguientes reflexiones y propuestas formuladas desde la academia concluyen que el gasto del Estado colombiano no sólo debe hacerse más eficiente, sino que debe aumentar para financiar los bienes públicos necesarios para el desarrollo del país. El gasto fiscal en Colombia es mucho menor que el de otros países con políticas de gasto responsables, como los de la OCDE, y el crecimiento de la deuda no es alarmante. Esto implica una reforma tributaria estructural, una mayor transparencia por parte del Estado en sus decisiones y en el gasto público, la elaboración de un presupuesto plurianual y por programas, la mejora de la gestión fiscal territorial, y una mayor decisión en el combate a la corrupción.
The following reflections and proposals from the Academy concludes that the Colombian fiscal expenditure should not only be more efficient but should increase to finance public goods necessary for the development of the country. The fiscal expenditure in Colombia is much lower than in other countries with responsible spending policies, such as the other members of the OECD, and the growth of the debt is not alarming. This implies a structural tax reform, greater transparency in government decisions and in public expenditure, the elaboration of a multi-year budget organized by programs, the improvement of the territorial fiscal management, and a major decision in the combat against corruption.

General government activity in the field of education has recently assumed new interest due to the importance of two analytical objectives: a) the existence of substitution or complementary processes between public and private expenditure in education; b) the importance of public expenditure in the fields of education, health etc. in economic development. Between 1861 and 1913, statistical information regarding Italian expenditure in education at local (provincial and municipal) level is particularly scarce and there is none at all on expenditure at local level for a number of periods. The reconstruction of missing data for regressors has been carried out by NIPALS algorithm (Non-linear estimation by Iterative PArtial Least Square) which calculates Principal Component Analysis (PCA) even when there are missing data. The reconstructed data have allowed improvement of the informative set and the lines of interpretation of General Government action in education. Our data confirm the id...

Government expenditures have grown in Austria during most of the 20th century. In this paper, we present empirical evidence for this growth process and analyze some of its possible reasons. In particular, two prominent theoretical explanations for public sector growth are tested for Austria: first, Wagners Law hypothesizing a positive income elasticity of demand for public goods, and second, Baumols Cost Disease, relating public sector growth to above-average cost increases in the public sector as compared to the private sector. The empirical evidence confirms the importance of the Cost Disease for Austria but cannot confirm the validity of Wagners Law. Business cycles influence government expenditures in the short run, while a number of variables suggested by public choice theories except for fiscal illusion do not significantly influence the growth of the public sector in Austria.

Scholars have always been puzzled about government revenue and expenditure in Nigeria over the years especially given the fact that the most important macroeconomic objectives of every government which includes price stability, full employment, balance of payment equilibrium and sustainable economic growth are not being attained. The questions as to how the government disburses funds have raised concerns which are the purpose of this study. This research work empirically aims to analyse the impact of government expenditure on economic growth in Nigeria using secondary data spanning 1985 to 2018. This data was collected from World Bank databank as well as Central Bank Statistical Bulletin. The variables adopted in the course of this research include: Gross Domestic Product as the dependent variable, capital expenditure, recurrent expenditure, external debt and exchange rate. The research work makes use of the unit root test which tests for stationarity, cointegration test which tests for long run impacts, granger causality test which estimates the direction of causality between variables and error correction mechanism which measures short run impacts as well as the overall stability of the analysis. Following the estimation of the model, it was discovered that the variables were all stationary at first difference. The co-integration test indicated that there exists only one co-integrating equation, hence, this still means that there exist long run impacts between the variables. The results from the granger causality test revealed that a unidirectional relationship exists between capital expenditure and economic growth, and also recurrent expenditure and economic growth Based on the results obtained from the tests carried out, we can therefore conclude that government expenditure plays a vital role in economic growth of the nation especially the developing nations like Nigeria. Therefore, for Nigeria to increase the proportion of revenue in order to spur expenditure significantly, there needs to be an expansion of productive activities in other sectors of the economy (other than the oil sector) in order to diversify the revenue base of the country

Tests for the presence of Leviathan, evidenced by a positive relationship between the size of government measured as a percentage of GDP, and the degree of fiscal centralization, have provided mixed results. We derive alternative measures of the size of government taking into account household and informal market activity. Traditional Leviathan models are then re-estimated for an international sample of forty-five countries. Controlling for income, population, intergovernmental grants, and urbanization we test whether fiscal centralization is responsible for the relative size of government. We find no evidence of a relationship between fiscal centralization and government size.

Scholars have always been puzzled about government revenue and expenditure in Nigeria over the years especially given the fact that the most important macroeconomic objectives of every government which includes price stability, full employment, balance of payment equilibrium and sustainable economic growth are not being attained. The questions as to how the government disburses funds have raised concerns which are the purpose of this study. This research work empirically aims to analyse the impact of government expenditure on economic growth in Nigeria using secondary data spanning 1985 to 2018. This data was collected from World Bank databank as well as Central Bank Statistical Bulletin. The variables adopted in the course of this research include: Gross Domestic Product as the dependent variable, capital expenditure, recurrent expenditure, external debt and exchange rate. The research work makes use of the unit root test which tests for stationarity, co-integration test which tests for long run impacts, granger causality test which estimates the direction of causality between variables and error correction mechanism which measures short run impacts as well as the overall stability of the analysis. Following the estimation of the model, it was discovered that the variables were all stationary at first difference. The co-integration test indicated that there exists only one co-integrating equation, hence, this still means that there exist long run impacts between the variables. The results from the granger causality test revealed that a uni-directional relationship exists between capital expenditure and economic growth, and also recurrent expenditure and economic growth. Based on the results obtained from the tests carried out, we can therefore conclude that government expenditure plays a vital role in economic growth of the nation especially the developing nations like Nigeria. Therefore, for Nigeria to increase the proportion of revenue in order to spur expenditure significantly, there needs to be an expansion of productive activities in other sectors of the economy (other than the oil sector) in order to diversify the revenue base of the country.

The attempt of abolishing fuel subsidy to alleviate the rising pressure on public finances would pose a threat to the performance of the sectors. This study, therefore, intends to identify the impact of abolishing the subsidies on domestic producers in Malaysia using a Löfgren-based computable general equilibrium (CGE) model. The findings show that the fuel subsidy abolition leads to a significant fall in the level of production, and consequently decreases output allocation for domestic and export markets. Sectors which use relatively large amounts of oil products in production would most likely be hit harder. Besides simulating the impact of abolishing the fuel subsidies, two supplementary regimes (reallocating the extra savings to the agricultural sector to assist the rural poor and transferring direct cash to those who are in need) are incorporated to deal with the decelerating growth in domestic production. Interestingly, raising agricultural investment is found to be more favourable in terms of better performance in the growth of the sector. Thus, it is advisable to include improvement of farming practices in designing policy measures. This study can further serve as a guideline in upgrading the existing subsidy abolition to ensure the performance of the sectors is wholly satisfactory.