Government spending and the distribution of economic growth

In the United States, total government spending, and especially government social spending, has increased greatly over the last 50 years. What effect this has had on economic growth is a subject of intense debate among politicians, policymakers, and economists. However, there has been less attention paid to the distributional effects of government spending even though economic inequality has grown greatly over the last generation and much social spending is at least indirectly intended to reduce inequality. The effects of government social spending in the United States on growth in family income at deciles of the income distribution were estimated. The results suggested that social spending but not non‐social spending was likely to increase growth in family income per capita measured over 10‐year intervals. The largest effects of social spending were for deciles below the median income. At no point in the distribution does social spending have a negative effect.     

Ricardian Equivalence and Fiscal Policy Effectiveness in Japan

The present paper asks whether there is a limit to the potential for government spending to stimulate output in the Japanese economy. Overlapping generations and Ricardian infinite horizon representative agent models are developed, in which the government spending multiplier falls as the level of spending rises. Consistent with the Ricardian hypothesis, vector autoregressions (VAR) indicate that the timing of taxes has little impact on national output. Conversely, the impact of government spending is significant. However, using non–linear VAR techniques, the author finds empirical evidence for the hypothesis of a regime–dependent government spending multiplier that falls as spending rises.     

政府支出的构成与中国经济波动——基于动态随机一般均衡模型的分析

政府支出对于一国经济波动具有显著性影响。基于我国的现实数据,向量自回归模型的脉冲响应函数证实：（1）生产性政府支出与消费性政府支出对于总产出具有不同的冲击效应,并且生产性政府支出对于产出具有相对较大的影响;（2）无论是政府生产性支出还是消费性支出,其对于不同部门的产出均具有不同的冲击效应,即政府支出的冲击效应具有部门依存性特征。在此基础上,文章建立了一个包含不同部门与政府支出不同构成成分的多部门经济NK-DSGE模型,考察了政府支出冲击的不同构成成分对于我国经济波动的影响。贝叶斯脉冲响应分析的结果支持了经验证据,并且模型主要变量的周期性特征与现实数据较为接近。在此基础上,贝叶斯冲击分解的结果指出,相对于消费性政府支出而言,生产性政府支出冲击对于各宏观经济变量的波动具有更大的推动作用。因此,在使用支出政策熨平经济波动时,政府需依据现实经济情况及时调整政府支出的构成。     

An Examination of the Government Spending and Economic Growth Nexus for Malaysia Using the Leveraged Bootstrap Simulation Approach

Abstract

The main objective of this study is to re-examine the government spending-growth nexus for Malaysia from the perspective of disaggregated government spending. The yearly data from 1960 to 2007 is used in this study. This study applied the bounds testing for co-integration and the leveraged bootstrap simulation approaches to examine the relationship between three different categories of government spending and national income in Malaysia. It is found that government spending on education and defence are co-integrated with national income. Nevertheless, there is no evidence of co-integrating relation between government spending on health and national income. The MWALD causality test shows strong evidence of unidirectional causal relationship running from national income to the three major government spending in Malaysia. However, bilateral causality evident exists only between government spending on health and national income.     

Government capital formation: Explaining the decline

Government Capital Formation: Explaining the Decline. —This paper examines whether various hypotheses put forward to explain the downward trends in government capital spending are supported by the data. Using panel data for 22 OECD countries for 1980–1992, various hypotheses are tested in a model. The authors find support for three hypotheses: (1) capital spending is reduced during periods of fiscal stringency, since this category of government spending is politically an easier target for cuts than other spending categories; (2) myopic governments will cut investment spending more than governments which have a longer policy horizon; (3) private investment influences government investment spending, because both types of investment are complementary.     

Access to savings and household welfare evidence from a household survey in The Gambia

In this study, we provide evidence on the impact of access to formal savings on household well‐being in The Gambia. Specifically, we study how access to formal savings can impact household outcomes such as total spending, ownership of durable assets, health spending, and education spending. Using a representative household survey and kernel ridge regression method, we find that household access to formal savings has a positive and statistically significant impact on all outcomes except health spending. Furthermore, we find that the largest effect size of access to savings is on education spending. However, the impact estimates on education and food expenditure are not very robust to a mild presence of hidden bias. Overall, we find a robust impact for total spending and asset ownership. Hence, increasing household access to formal savings can improve household well‐being in The Gambia.     

城乡二元经济结构对消费率的影响

消费率是指最终消费支出占GDP的比重。我国消费率一直偏低并且持续下降,阻碍了经济发展方式的转变。因此,提高消费率是我国经济发展中的一个重要问题。城乡二元经济结构是我国基本的经济结构,影响着我国经济运行的各个方面。文章从总量数据与人均数据两个层次分析消费率的影响因素,并且特别分析了人口城镇化水平与城乡收入差距对消费率的影响,探寻提高消费率的有效途径。实证结果表明：加快城乡二元结构的转变与提高农村居民消费水平是提高消费率的最重要的有放徐绳．     

政府支出与经济波动——基于省级面板数据的实证分析

政府支出能否起到稳定经济增长的作用是一个值得研究的重要问题。使用1987-2013年30个省市自治区的面板数据,文章考察了政府支出对我国经济波动的影响。在考虑政府支出规模的内生性后,2SLS估计结果发现政府支出对经济波动的影响具有两面性。一方面政府支出规模主要发挥了财政自动稳定器作用,因而减少了经济波动;另一方面,政府支出变动对总量产出冲击较大,从而增加了经济波动。进一步控制了贸易开放、通货膨胀、货币政策冲击、金融发展和产业结构等因素,估计结果表现出较好的稳健性。研究结论意味着,在保持经济稳定增长方面,需要权衡政府支出规模与政府支出变动对经济波动的影响。     

Dynamics between government spending and economic growth in China: an analysis of productivity growth

This study investigates the dynamics between government spending and economic growth in China through influencing the productivity growth of human capital byapplying Markov switching estimates for the annual time series data of China over the period 1952–2014. Firstly, we found that the Chinese economy exists in two states including state one with low growth and state two with high growth. Secondly, the consumption spending has significantly positive effect both states, while the military spending has only positive effect in state two. Interestingly, the growth effect level of consumption spending in state two is smaller than that in state one, implying a reducing effect of total factor productivity in state two. Thirdly, the combined effects of consumption spending and military spending with human capital are state dependent. This combined effect is reduced in both states, suggesting that government spending does not improve the productivity growth effect of human capital.     

How can quality regional spending reduce poverty and improve human development index?

There is only a small amount of literature that discusses government spending and development performance, especially poverty and the human development index (HDI). Most of them discuss through income. Although some discuss government spending, few discuss their quality. This paper attempts to examine and discuss the quality of government spending and then to link its effects to poverty and HDI rates for underdeveloped areas in Indonesia in Java. The method used in this study is to use the Partial Least Squares Structural Equation Model (PLS-SEM) with the help of SmartPLS software. The results of this study indicate that the quality of government spending is supported by the constructs of PRIORITY, ALLOCATION, TIME, ACCOUNTABILITY, and EFFECTIVENESS. This means that government spending can be said to be of quality when viewed from the five constructs. The results of this study also concluded that quality government spending can reduce poverty levels and the human development index (HDI).     

Identifying government spending shocks and multipliers in Korea

We construct a government spending news series in Korea based on Fisher and Peters (2010) by exploiting a market-weighted sum of excess stock returns of military contractors in Korea. We then use this military spending news series and estimate a structural VAR model to evaluate the effects of government spending. As a result, GDP and government spending show statistically significant responses to military spending news shocks. The accumulated government spending multiplier peaks after four quarters, and the five-year cumulative multiplier is calculated as 1.27. For a robustness check, different types of VAR models are tested and results are qualitatively similar.     

Do Indian States Mimic,Compete or Interact in Local Public Spending? A Spatial Econometric Analysis

This paper analyses spatial interaction in public spending decisions across 22 Indian states during the period 1980–1981 to 2014–2015. In particular, we estimate interactive hypotheses for different proximities of states using a spatial panel data approach. The empirical results support strong spatial interaction and yardstick competition in public spending. Interactive behavior among the states has been found to be consistent and conditional on per capita income, fiscal transfers, infrastructure, literacy and population density. Interaction arising from yardstick competition significantly affects public spending decisions. The present study realizes the need for a well‐developed and comprehensive network to strengthen the interdependence in public spending among the states for higher welfare gain.     

Optimal government spending in an economy with imperfectly competitive goods and labor markets

This article examines the growth‐ and welfare‐maximizing government spending in an economy that is characterized by market imperfections, namely, unionization in the labor market and monopolistic competition in the goods market. To thoughtfully explore the optimal spending, two distinct scenarios where the government spending is financed by labor/capital income taxes are considered. Our analysis shows that the optimal growth‐maximizing government spending is inconsistent with the welfare‐maximizing government spending. Moreover, the growth‐maximizing/welfare‐maximizing government spending have quite different responses to distinctive market imperfections (markups in the goods and labor markets), particularly in the scenarios with distinctive financing modes. Our numerical study indicates that the growth‐maximizing and welfare‐maximizing government expenditures, in general, are more responsive to the change in the labor market friction than that in the product market friction and the growth‐maximizing government spending is more likely to be lower than the welfare‐maximizing government spending.     

Fiscal announcements and real exchange rate dynamics

This paper examines the dynamic impact of anticipated government spending on real exchange rates in a general-equilibrium framework. I show that an increase in government spending causes persistent movements in real exchange rates, and that the time profile of real exchange rates differs with patterns of government spending. Hence, one of the explanations for the misalignment and excess volatility of real exchange rates during the flexible exchange rate system may be volatile changes in government spending.     

Foreign Aid and Domestic Politics: Voting in Congress and the Allocation of USAID Contracts across Congressional Districts

This paper investigates the relationship between congressional support for foreign aid and the distribution of United States Agency for International Development (USAID) contract spending across congressional districts within the United States. The extent to which such a relationship matters has become increasingly important in recent years, as the end of the Cold War and the advent of the Republican-controlled Congress have eroded the traditional base of support for foreign aid. We develop a model to illustrate how the distribution of contract spending could be used to increase support for foreign aid, but at the expense of development impact, in effect trading quality for quantity. Data on domestic foreign aid contract spending and votes in the 104th Congress House of Representatives allow us to test whether the geographic distribution of USAID contract spending within the United States is consistent with a systematic attempt to build support for foreign aid in Congress. Econometric results provide little evidence of such attempts, apparently because voting on this issue is insensitive to the distribution of contract spending.     

EXPLAINING THE GROWTH OF GOVERNMENT SPENDING IN SOUTH AFRICA

What determines government spending in South Africa? The paper estimates the determinants of real per capita government spending in the Republic of South Africa using annual data for the period 1960‐2007, a tumultuous period during which South Africa experienced a variety of internally imposed changes (e.g. the abolition of apartheid, changes in political institutions) and externally generated shocks (e.g. war, oil shocks). Using multivariate cointegration techniques, we find that per capita government spending, per capita income, the tax share and the wage rate are cointegrated, a result that supports the notion that government spending is associated not only with per capita income and the true cost of government service provision as given by the wage rate but also with the fiscal illusion caused by budget deficits. We also find evidence that per capita government spending was positively affected by external shocks. These external shocks seem to play a significant role in explaining the dynamics of government spending growth.     

Second World War spending and local economic activity in US counties, 1939–58

Studies of the development of local economies often point to large‐scale Second World War military spending as a source of economic growth, even though spending declined sharply after demobilization. We examine the relationship between war spending per capita and the changes in economic activity in US counties between 1939 before the war and a period several years after the war. In the longer term counties receiving more war spending per capita during the war experienced greater population growth, but growth in per capita measures of economic activity showed little relationship with per capita war spending.     

Public and private Investment in Mexico and Chile: An empirical test of the complementarity hypothesis

This paper addresses the important question of whether government investment spending, rather than overall public expenditures, exerts a positive effect on economic growth and productivity. Using time-series data for Chile and Mexico, it estimates a linear growth model that incorporates a number of relevant quantitative and qualitative variables for each country. The empirical results suggest that for both Chile and Mexico, increases in public and private investment spending have a positive and significant effect on the rate of growth in productivity. Moreover, the results for Mexico show that increases in government consumption expenditures have a negative effect on the rate of productivity growth, thus suggesting that the composition of government spending is at least as important as the growth rate of these expenditures in affecting economic growth. From a policy standpoint, these findings call into question the current trend among Latin American countries of indiscriminately reducing public spending because they fall disproportionally on capital expenditures—the type of spending needed to secure the long-term efficiency gains from market-oriented programs.     

Economic growth and the human capital intensity of government spending

The paper models an economy in which long-run growth is driven by human-capital-intensive, private sector research and development, and shows how government spending affects growth through its impact on relative wages. The more human-capital-intensive government spending is relative to private spending, the greater the derived demand for and relative wage of human capital and, hence, the more costly is research and development. The private sector thus devotes fewer resources to research and development and the rates of innovation and economic growth are lower. The paper argues that these effects are likely to be negative, and possibly substantial, in the U.S. The paper's results also offer a plausible explanation for the insignificance of government spending in cross-country growth regressions in recent empirical studies.     

How better targeting of social spending affects social delivery in South Africa

Social spending has become a major tool of targeting resources to South Africa's poor. The poor now get considerably more than their population share of social spending, but the underlying distribution of income is so skewed that overall post-fiscal inequality has not improved much. Concentration ratios and curves show considerable shifts in social spending incidence in the period 1995 to 2006. However, the efficiency of that spending is low, resulting in limited social outcomes and consequently also limited gains to the poor from better targeting. This paper therefore calls for the South African policy discussion to shift to why the ever-increasing fiscal inputs and improved targeting of those inputs have not produced the desired social outcomes.