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Article
Publication date: 16 July 2019

Kafayat Amusa and Mutiu Abimbola Oyinlola

The purpose of this paper is to examine the relationship between government expenditure and economic growth in Botswana over the period 1985‒2016. The study employed the…

Abstract

Purpose

The purpose of this paper is to examine the relationship between government expenditure and economic growth in Botswana over the period 1985‒2016. The study employed the auto-regressive distributed lag (ARDL) bounds testing approach in investigating the nexus. The study makes the argument that the effectiveness of public spending should be assessed not only against the amount of the expenditure but also by the type of the expenditure. The empirical findings showed that aggregate expenditure has a negative short-run and positive long-run effect on economic growth. When expenditure is disaggregated, both forms of expenditures have a positive short-run effect on economic growth, whereas only a long-run positive impact of recurrent expenditure is observed. The study suggests the need to prioritize scarce resources in productive recurrent and development spending that enables increased productivity.

Design/methodology/approach

This study examined the effectiveness of government spending in Botswana, within an ARDL framework from 1985 to 2016. To achieve this, the analysis is carried out on both an aggregate and disaggregated level. Government spending is divided into recurrent and development expenditures.

Findings

This study examined the effectiveness of government spending in Botswana, within an ARDL framework from 1985 to 2016. To achieve this, the analysis hinged on both the aggregate and disaggregated levels. The results of the aggregate analysis suggest that total public expenditure has a negative impact on economic growth in the short run; however, its impact becomes positive over the long run. On disaggregating government spending, the results show that both recurrent and development expenditures have a significant positive short-run impact on growth; however, in the long run, the significant positive impact is only observed for recurrent expenditure.

Practical implications

The results provide evidence of the diverse effects of government expenditure in the country. In the period under investigation, 73 percent of total government expenditure in Botswana was recurrent in nature, whereas 23 percent was related to development. From the results, it can be observed that although the recurrent expenditure has contributed to increased growth and must be encouraged, it is also pertinent for the Botswana Government to endeavor to place more emphasis on productive development expenditure in order to enhance short- and long-term growth. Further, there is a need to strengthen the growth-enhancing structures and to prioritize the scarce economic resources toward productive spending and ensuring continued proper governance over such expenditures.

Originality/value

The study provides empirical evidence on the effectiveness of government spending in a small open, resource-reliant middle-income SSA economy and argues that the effectiveness of public spending must be assessed not only against the amount of the expenditure but also on the type or composition of the expenditure. The study contributes to the scant empirical literature on Botswana by employing the ARDL approach to cointegration technique in estimating the long- and short-run impact of government expenditure on economic growth between 1985 and 2016.

Details

African Journal of Economic and Management Studies, vol. 10 no. 3
Type: Research Article
ISSN: 2040-0705

Keywords

Article
Publication date: 6 June 2008

Vera Ogeh Soli, Simon Kwadzogah Harvey and Edmond Hagan

This paper aims to examine the relationships between disaggregated government fiscal policy variables; private capital investment and economic growth in Ghana, as well as…

3094

Abstract

Purpose

This paper aims to examine the relationships between disaggregated government fiscal policy variables; private capital investment and economic growth in Ghana, as well as the similarities and differences in the impact of these variables on private investment (PI) and economic growth.

Design/methodology/approach

Cointegration and an error‐correction models are used, with time series properties of the variables investigate using augmented Dickey‐Fuller test and cointegration of the variables tested using Engel‐Granger two step procedure.

Findings

The findings indicate that changes in government recurrent expenditure, current government capital expenditure and international trade taxes are significant for growth while changes in tax on domestic goods and services, tax on international trade and tax on income and property matter for private capital investment. The major difference between the impact of fiscal policy on PI and economic growth, however, lies in the direction of impact.

Practical implications

Based on the findings of this study, it is recommended that different policies be pursued in the promotion of PI and economic growth. Also, given the low correlation between PI and economic growth, it is recommended that the Ghanaian private sector be focused on and fully developed in order for it to perform its role as an engine of growth.

Originality/value

Growth has been shown to be influenced by government expenditure and international trade taxes while private capital investment is influenced by taxes on domestic goods and services, international trade and on income and property. Fiscal policy authorities will find these useful.

Details

Studies in Economics and Finance, vol. 25 no. 2
Type: Research Article
ISSN: 1086-7376

Keywords

Article
Publication date: 1 July 1993

Mohammed I. Ansari

The relationship between government expenditure and economic growth has been extensively studied both in public finance literature and in the literature dealing with…

Abstract

The relationship between government expenditure and economic growth has been extensively studied both in public finance literature and in the literature dealing with macroeconomic modelling.In public finance the issue dates back to Adolph Wagner (1890) or even before. But Wagner is known to have presented the idea in its modern form. Wagner essentially presented a behavioral statement about the growth of public expenditure which, after some refinements by others, has come to be known as the Wagner's hypothesis (WH). According to this, the growing importance of the state activity and therefore public expenditure is an inevitable feature of a progressive society. In modern literature, the proposition is formulated as follows: as per capita income rises, the share of the public sector increases because:(1) protective and administrative functions of the state expand,(2)state activities pertaining to culture and education expand, and (3) increasing tendency towards monopoly due to technological advancement and increasing returns to scale need to be offset by state actions.The WH is often considered to represent a long‐term relationship which is expected to apply to countries during their early stages of growth and development. The implication of WH is that the causation runs from economic growth to growth in government expenditure. A more important implication of this hypothesis, however, is that government expenditure does not qualify as development finance because it plays no role in economic growth.

Details

Managerial Finance, vol. 19 no. 7
Type: Research Article
ISSN: 0307-4358

Article
Publication date: 1 December 1997

Shu‐hung Tang

The Hong Kong government emphasizes very much the importance of achieving the “financial stability” objective, and has been very successful in controlling expenditure

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Abstract

The Hong Kong government emphasizes very much the importance of achieving the “financial stability” objective, and has been very successful in controlling expenditure growth and in accumulating fiscal reserves. This remarkable performance is attributed to adhering consistently to budgetary guidelines. Managing the financial budgets through budgetary guidelines is a unique feature of the Hong Kong fiscal system. Discusses the role of budgetary guidelines in the Hong Kong fiscal system, and reviews the evolution of these budgetary guidelines since the early 1970s. It turns out that the guideline on expenditure growth is the most important budgetary guideline. Fiscal performance is assessed against these budgetary guidelines. With the financial stability objective having long been achieved, strict adherence to these budgetary guidelines would unduly constrain social and economic developments in Hong Kong. Recommends comprehensive review of the role and function of these budgetary guidelines.

Details

International Journal of Public Sector Management, vol. 10 no. 7
Type: Research Article
ISSN: 0951-3558

Keywords

Article
Publication date: 27 June 2022

Toan Pham-Khanh Tran, Ngoc Phu Tran, Phuc Van Nguyen and Duc Hong Vo

The effects of government expenditure on the shadow economy have been investigated. However, the effect from a moderating factor that affects this relationship has been…

Abstract

Purpose

The effects of government expenditure on the shadow economy have been investigated. However, the effect from a moderating factor that affects this relationship has been largely ignored in the existing literature. This paper investigates how fiscal deficit moderates the effects of government expenditure on the shadow economy for 32 Asian countries for the past two decades since 2000.

Design/methodology/approach

The authors use various techniques, which allow cross-sectional dependence and slope homogeneity in panel data analysis, to examine this relationship in both the long run and short run. The analysis also considers the marginal effects of government expenditure on the shadow economy at different degrees of fiscal deficits.

Findings

Empirical findings from this paper indicate that an increase in government expenditure and fiscal deficit will increase the shadow economy size. Interestingly, the effects of government expenditure on the shadow economy will intensify with a greater degree of the budget deficit. The authors also find that enhancing economic growth to improve income per capita and extending international trade appears to reduce the shadow economy in the Asian countries.

Practical implications

The authors consider that policies targeting reducing shadow economy should follow conventional economic policies on economic growth, unemployment and inflation.

Originality/value

To the best of the authors’ knowledge, this is the first empirical study conducted to examine the moderating role of fiscal deficit in the government expenditure–shadow economy nexus in Asian countries.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Open Access
Article
Publication date: 15 February 2021

Prince Fosu and Martinson Ankrah Twumasi

In Covid-19 pandemic era when most households' members have lost their jobs and incomes, the government assistance and programs in ensuring household consumption smoothing…

Abstract

Purpose

In Covid-19 pandemic era when most households' members have lost their jobs and incomes, the government assistance and programs in ensuring household consumption smoothing is very significant. The main objectives of this study are to analyze the impact of government expenditure and free maternal healthcare (FMHC) policy on household consumption expenditure in Ghana in both long run and short run.

Design/methodology/approach

They used the ARDL to estimate the impact of government expenditure on household consumption and Segmented Linear Regression to examine impact of FMHC policy household consumption using longitudinal data from 1967 to 2018.

Findings

The results revealed that government expenditure had a negative and statistically significant effect on household consumption expenditure suggesting that government expenditure crowed-out private consumption in Ghana. Also, it was observed that before the implementation of the FMHC policy, there was an increase household consumption expenditure, but after the introduction of the FMHC policy, the study household consumption expenditure decreases significantly suggesting that FMHC policy has strong association with household consumption in Ghana.

Research limitations/implications

Due to limited data availability, this study did not assess the impact of the FMHC policy at the household or district level. Also, Ghana has introduced a free senior high school education policy in 2017 so further research could analyze the implications of these policies for household consumption in Ghana at the micro-level using different estimation technique such as the difference in difference.

Practical implications

The study suggests the need to increase public spending on basic social amenities and also extend the free maternal healthcare policy to all pregnant women especially those in the rural areas of Ghana as these have a greater impact on household consumption in Ghana. The findings from this study have important implications for household savings and interest rate in Ghana. The findings from this study also have important implications for both fiscal policy and healthcare policy in Ghana and other developing countries.

Originality/value

To the best of my knowledge this is the first empirical study to examine the effect of government expenditure and free maternal healthcare policy on household consumption in Ghana.

Details

Journal of Economics and Development, vol. 23 no. 2
Type: Research Article
ISSN: 1859-0020

Keywords

Article
Publication date: 14 May 2021

Noor Zahirah Mohd Sidek

This paper aims to re-examine the impact of government expenditure on income inequality. Existing studies provide mixed results on whether government expenditure reduces…

Abstract

Purpose

This paper aims to re-examine the impact of government expenditure on income inequality. Existing studies provide mixed results on whether government expenditure reduces or increases income inequality. In this paper, government expenditure is viewed as a tool for redistribution, hence, its impact on inequality is examined.

Design/methodology/approach

A sample of 122 countries with 91 and 31 countries categorized as developing and developed countries is used. The dynamic panel threshold regression is used to examine the impact of government expenditure on income inequality and to estimate the turning point of the negative or positive effects.

Findings

The major findings suggest that, in general, government expenditure does reduce income inequality. Results from developed countries support the inversed U-shaped Kuznet curve where higher government expenditure initially led to more inequality but would eventually bring about a positive effect after a certain threshold level. For developing countries, education and development expenditure were the driving forces towards lower income inequality.

Practical implications

Several policy implications can be derived from this paper. First, government expenditure is a useful tool to alleviate the problem of income inequality. More integration with the global economy via trading activities is also an important channel to help reduce income inequality. Finally, better institutional quality provides an effective ecosystem in promoting better redistribution of income via government expenditure.

Originality/value

This paper presents a maiden attempt to estimate a threshold value or when government expenditure starts to reduce or increase income inequality. The sample is segregated into developed and developing countries to further control the effect of government size and the level of development of a country.

Details

Studies in Economics and Finance, vol. 38 no. 2
Type: Research Article
ISSN: 1086-7376

Keywords

Article
Publication date: 1 March 2017

Geoffrey Propheter

In August 2015, the Government Accounting Standards Board (GASB) adopted Statement 77, requiring government disclosure in audited financial reports of a particular type of…

Abstract

In August 2015, the Government Accounting Standards Board (GASB) adopted Statement 77, requiring government disclosure in audited financial reports of a particular type of tax expenditure, tax abatements. GASB's reporting standards move tax abatements from a budgetary environment to an accounting environment. This paper evaluates GASB 77's provisions to encourage an early and on-going dialogue about the Statement's prospects for achieving greater transparency compared to existing tax expenditure reporting efforts. We conclude that GASB 77 will be most beneficial to consumers of financial information in medium and large jurisdictions where there is no alternative tax abatement disclosure platform, or where the alternative offers less transparency than what can be achieved through financial reporting.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 29 no. 4
Type: Research Article
ISSN: 1096-3367

Article
Publication date: 27 February 2007

Neelesh Gounder, Paresh Kumar Narayan and Arti Prasad

Understanding the relationship between government revenue and government expenditure is important from a policy point of view, especially for a country like Fiji, which is…

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Abstract

Purpose

Understanding the relationship between government revenue and government expenditure is important from a policy point of view, especially for a country like Fiji, which is suffering from persistent budget deficits. The aim of this paper is to investigate the relationship between government revenue and expenditure for Fiji.

Design/methodology/approach

The Johansen test for cointegration and Granger causality test are used to conduct the empirical analysis.

Findings

The key findings are that: government revenue and government expenditure in both the aggregate and disaggregate sense are cointegrated; in the short‐run government expenditure Granger causes government revenue in an aggregate sense, departmental expenditure Granger causes aggregate revenue, and there is bidirectional causality running between government expenditure and customs duties; and in the long‐run there is evidence of fiscal synchronization, implying that expenditure decisions are not made in isolation from revenue decisions.

Research limitations/implications

This fiscal synchronization has not been able curb the current account deficit in Fiji. Moreover, the confirmation of the spend‐tax attitude of the government does not bode well for the level of investments and skilled human capital in Fiji as this may perpetuate tax increases in the future. Given that the Fiji Government is currently trying to rein in the escalating level of fiscal deficit, it is an opportune time for them to engage in extensive expenditure reforms.

Originality/value

The findings of this paper should allow policy makers to make informed decisions. Furthermore, the paper is different from others because apart from examining the revenue and expenditure in an aggregate sense, it also considers the different components of revenue and expenditure.

Details

International Journal of Social Economics, vol. 34 no. 3
Type: Research Article
ISSN: 0306-8293

Keywords

Article
Publication date: 1 March 2004

P. Edward French

The impact of form of government on municipal expenditures has been debated by several scholars and researchers over the past thirty years. Part of the support for…

Abstract

The impact of form of government on municipal expenditures has been debated by several scholars and researchers over the past thirty years. Part of the support for preference of the council-manager form of government over the other government forms relies on claims that the council-manager form provides increased efficiency in the operation of government. Results of numerous municipal expenditure studies, however, reveal that this outcome is not always clearly demonstrated. Almost all of this existing literature has utilized data from municipalities with populations greater than 25,000. This study evaluates the relationship between form of government and per capita expenditures in cities and towns with populations between 2,500 and 25,000. Survey data from 559 cities and towns are analyzed to determine whether or not their form of government can be significantly related to municipal per capita expenditures. Results of this analysis reveal that council-manager cities and towns exhibit significantly higher per capita expenditure levels than cities and towns with the non-council-manager forms of government.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 16 no. 2
Type: Research Article
ISSN: 1096-3367

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