scholarly journals The Dynamic Impact of Government Expenditure in Education on Economic Growth

2021 ◽  
Vol 22 (3) ◽  
pp. 1487-1507
Author(s):  
Norimah Rambeli ◽  
Dayang Affizzah Awang Marikan ◽  
Jan M. Podivinsky ◽  
Rosilawati Amiruddin ◽  
Ismadi Ismail
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Economic Crisis ◽  
Financial Planning ◽  
Government Spending ◽  
Government Expenditure ◽  
Dynamic Impact ◽  
Long Run ◽  
Growth Hypothesis

The focal aim of this study is to examine the validation of education-led economic growth hypothesis in Malaysia under the recovery period following the 2008 world economic crisis. Specifically, this study implemented the augmented Cobb-Douglas model in order to observe the dynamic relationship between selected variables including, industrial production index, gross fixed capital formation, employment, government spending on education and broad money supply. This study adopted the Vector Error Correction Model (VECM) in analysing the dynamic impact between variables and generally supports the education-led growth hypothesis in the short and long run. Specifically the study corroborates the bidirectional causality between education spending and economic growth, and vice versa, in the short run. The result also reveals that long-run equilibrium relationship exists between government expenditure in education and economic growth in Malaysia during post-crisis recovery regime. The education-led growth hypothesis can thus be inferred for the economy following crisis. The government should thus be advised that increasing education sector spending should increase post-crisis economic growth in both the short and long run. This is further strengthened by Granger causality test result which suggests unidirectional causality that runs from financial variable to economic growth. It is accordingly suggested that financial variable is a determinant of government spending on education in the aftermath of the economic crisis. Additionally, the study also supports the role of capital and employment on economic growth in the long term. By implication, the study suggests that financial planning as related to national education policies must be carefully and meticulously crafted, to ensure future success. This is linked to the investment in human capital which includes education expenditure at different levels that is essentially important to national long-term planning. The specific financial planning for human capital development is therefore very important to ensure the expenditure incurred contributes to sustainable economic development in Malaysia in the long term.

The composition of productive government expenditure

2008 ◽  
Vol 1 (1) ◽  
pp. 57-83 ◽  
Author(s):  
Goncalo Monteiro ◽  
Stephen J. Turnovsky
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Government Spending ◽  
Public Investment ◽  
Government Expenditure ◽  
Physical Capital ◽  
Content Type ◽  
Trade Offs ◽  
Long Run ◽  
Productive Government Spending

PurposeRecent research supports the role of productive government spending as an important determinant of economic growth. Previous analyses have focused on the separate effects of public investment in infrastructure and on investment in education. This paper aims to introduce both types of public investment simultaneously, enabling the authors to address the trade‐offs that resource constraints may impose on their choice.Design/methodology/approachThe authors employ a two‐sector endogenous growth model, with physical and human capital. Physical capital is produced in the final output sector, using human capital, physical capital, and government spending on infrastructure. Human capital is produced in the education sector using human capital, physical capital, and government spending on public education. The introduction of productive government spending in both sectors yields an important structural difference from the traditional two‐sector growth models in that the relative price of human to physical capital dynamics does not evolve independently of the quantity dynamics.FindingsThe model yields both a long‐run growth‐maximizing and welfare‐maximizing expenditure rate and allocation of expenditure on productive capital. The welfare‐maximizing rate of expenditure is less than the growth‐maximizing rate, with the opposite being the case with regard to their allocation. Moreover, the growth‐maximizing value of the expenditure rate is independent of the composition of government spending, and vice versa. Because of the complexity of the model, the analysis of its dynamics requires the use of numerical simulations the specific shocks analyzed being productivity increases. During the transition, the growth rates of the two forms of capital approach their common equilibrium from opposite directions, this depending upon both the sector in which the shock occurs and the relative sectoral capital intensities.Research limitations/implicationsThese findings confirm that the form in which the government carries out its productive expenditures is important. The authors have retained the simpler, but widely employed, assumption that government expenditure influences private productivity as a flow. But given the importance of public investment suggests that extending this analysis to focus on public capital would be useful.Originality/valueTwo‐sector models of economic growth have proven to be a powerful tool for analyzing a wide range of issues in economic growth. The originality of this paper is to consider the relative impact of government spending on infrastructure and government spending on human capital and the trade‐offs that they entail, both in the long run and over time.

scholarly journals Testing tourism-led economic growth and economic-driven tourism growth hypotheses

Tourism ◽  
2020 ◽  
Vol 68 (1) ◽  
pp. 43-57
Author(s):  
Khatai Aliyev ◽  
Nargiz Ahmadova
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Resource Curse ◽  
Crowding Out ◽  
Long Run ◽  
Tourism Sector ◽  
Tourism Resource ◽  
Short Run ◽  
Growth Hypothesis

This paper empirically investigates a causal relationship between tourism and economic growth in Georgia for 1997-2018 period by employing ARDLBT approach to cointegration. Results reject economic-driven tourism growth hypothesis for Georgia and reveal that impact of tourism development over economic growth is negative in the long-run, in contrary positive in the short-run. Obtained results suggest that there is a possibility to have a tourism resource curse in the long-term in Georgia. Georgian government should build a tourism strategy to avoid crowding out of human capital from industrial production and decrease the share of imports for the needs of tourism sector

scholarly journals Government Stimulus Policy Effects to Foster Indonesia's Economic Growth: Evidence from Seventeen Years' Experience

2021 ◽  
Vol 10 (1) ◽  
pp. 63-76
Author(s):  
Agus Sriyanto ◽  
Sri Murwani ◽  
Eleonora Sofilda
Keyword(s):  
Economic Growth ◽  
Government Spending ◽  
Government Expenditure ◽  
Government Debt ◽  
Influential Factor ◽  
Bounds Testing ◽  
Policy Effects ◽  
Stimulus Effects ◽  
Positive Effect

We study the budget stimulus effects and government spending to help foster the recovery of Indonesia's current economic growth that was hit by the monetary crisis 1997 and 2008. Using government spending allocation policies through capital expenditures, infrastructure expenditures, financing through government debt, private debts, and increased productivity through export and import activities. This research provides to proves the extent to which macroeconomic variables could promote Indonesia's economic growth due to the crisis—using quantitative analysis of time series in the analysis of cointegration autoregressive distribution lag and bounds testing cointegration starting from 2001 Q4 to 2018q4 data. We can prove that in the short term, the most influential factor in economic growth is the first lag of the GDP growth itself; The first lag of exports, and the first lag of government spending and imports. However, some factors still negatively affect corruption control, government effectiveness, and government debt. While in the long term, government expenditure and imports still have a positive effect, but corruption control is still hurt GDP.JEL Classification: G18, O47How to Cite:Sriyanto, A., Murwani, S., & Sofilda, E. (2021). Government Stimulus Policy Effects to Foster Indonesia's Economic Growth: Evidence from Seventeen Years' Experience. Signifikan: Jurnal Ilmu Ekonomi, 10(1), 63-76. https://doi.org/10.15408/sjie.v10i1.15480.

The effectiveness of government expenditure on economic growth in Botswana

2019 ◽  
Vol 10 (3) ◽  
pp. 368-384 ◽  
Author(s):  
Kafayat Amusa ◽  
Mutiu Abimbola Oyinlola
Keyword(s):  
Economic Growth ◽  
Government Spending ◽  
Negative Impact ◽  
Positive Impact ◽  
Government Expenditure ◽  
Public Spending ◽  
Empirical Literature ◽  
Content Type ◽  
Long Run ◽  
Short Run

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.

scholarly journals The Asymmetric Influence of Financial Development on Economic Growth in Kenya: Evidence From NARDL

SAGE Open ◽  
2020 ◽  
Vol 10 (1) ◽  
pp. 215824401989407 ◽  
Author(s):  
Hao Chen ◽  
Duncan O. Hongo ◽  
Max William Ssali ◽  
Maurice Simiyu Nyaranga ◽  
Consolata Wairimu Nderitu
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Government Spending ◽  
Capital Accumulation ◽  
Research Question ◽  
Government Expenditure ◽  
Model Specification ◽  
Long Run ◽  
Short Run ◽  
Auto Regressive

This study analyzed the asymmetric effects of financial development on economic growth using a model augmented with inflation and government expenditure asymmetries to inform model specification. The research question used entails, Do their asymmetry changes significantly influence growth? Using the nonlinear auto-regressive distributive lag (NARDL), the most significant results posit that positive shocks in financial development in the short run and its negative shocks in the long run increase and decrease economic growth, respectively. Regarding inflation, its positive (negative) shocks in both runs, respectively, reduce (increase) economic growth. In comparison, positive shocks in financial development that spur growth in the short run and negative shocks in financial development (government expenditure) that increase (reduce) growth are the most domineering effects as the rest of the shocks insignificantly affect growth. Results clearly demonstrate to an environment steered by stable and sustainable inflation that regulated government expenditure and comprehensive financial system deepening would positively cause economic growth. Therefore, appropriate policies that favor low inflation and reduced government spending, expansion of feasibly reformed financial institutions, capital accumulation, and increased resource mobilization should be instituted if real growth is to positively happen.

scholarly journals Population and Economic Growth Under Different Growth Engines

2017 ◽  
Vol 18 (2) ◽  
pp. 182-211 ◽  
Author(s):  
Alberto Bucci ◽  
Xavier Raurich
Keyword(s):  
Economic Growth ◽  
Growth Rate ◽  
Human Capital ◽  
Population Growth ◽  
Capital Accumulation ◽  
Capital Investment ◽  
Human Capital Investment ◽  
Physical Capital ◽  
Long Run

Abstract Using a growth model with physical capital accumulation, human capital investment and horizontal R&D activity, this paper proposes an alternative channel through which an increase in the population growth rate may yield a non-uniform (i.e., a positive, negative, or neutral) impact on the long-run growth rate of per-capita GDP, as available empirical evidence seems mostly to suggest. The proposed mechanism relies on the nature of the process of economic growth (whether it is fully or semi-endogenous), and the peculiar engine(s) driving economic growth (human capital investment, R&D activity, or both). The model also explains why in the long term the association between population growth and productivity growth may ultimately be negative when R&D is an engine of economic growth.

Werkgelegenheid en economische groei: Duitsland als voorbeeld voor Europa?

2012 ◽  
Vol 28 (2) ◽  
Author(s):  
Freddy Heylen ◽  
Tim Buyse
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Full Employment ◽  
Export Performance ◽  
Macroeconomic Performance ◽  
Wage Formation ◽  
The Past ◽  
Long Run ◽  
German Model

Employment and economic growth: is Germany an example to Europe? Employment and economic growth: is Germany an example to Europe? In this article we describe and evaluate the macroeconomic performance of Germany during the past decade. We focus on wage formation, competitiveness and export performance. We ask the question to what extent the German model is successful in relation to the long-run challenges posed by ageing and the need for higher employment, productivity and growth. We compare Germany with other European countries, including Belgium, the Netherlands and the Nordic countries. We conclude that the success of the German model is only partial. The ‘guide’ does not convince on certain aspects such as investment in human capital and the realization of full employment. Neither have the low skilled and the long-term unemployed been able to improve their relative position on the German labour market.

scholarly journals Human Capital Development, Economic Rejuvenation and Stable Long-Term Growth: The Case of Nigeria

2014 ◽  
Vol 27 ◽  
pp. 202-214
Author(s):  
Martins Iyoboyi
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Development Economic ◽  
Bounds Testing ◽  
Human Capital Development ◽  
Long Run ◽  
Stable Growth ◽  
The Stability ◽  
Capital Development

The paper investigates the relative impact of human capital development on economic rejuvenation and growth in Nigeria form 1981 to 2010, using the bounds testing approach to cointegration. The study utilized a combined proxy of education and health to capture the influence of human capital on growing and consequently rejuvenating an economy. Fixed capital and human capital were found to be positively associated with economic growth in both the short and long run, while Granger-causing economic growth in the period of study, implying the imperatives of using them to rejuvenate an economy. The stability of the coefficients of the estimated model is confirmed by the CUSUM and CUSUMSQ tests. The paper showed that for Nigeria’s economic rejuvenation and long-term stable growth, emphasis should be placed on deliberately developing the country’s vast human resources.

scholarly journals Financial Development and Economic Growth in Kenya: Evidence from the Asymmetric Autoregressive Distributive Lag

2021 ◽  
Vol 04 (05) ◽  
Author(s):  
Duncan O. Hongo ◽  
◽  
Liu Jie Consolata Wairimu Nderitu
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Financial Risk ◽  
Government Expenditure ◽  
Capital Formation ◽  
Long Run ◽  
State Expenditure ◽  
Positive Shock ◽  
Risk Managers

Appropriate changes in financial development are largely known to cause growth. Inflation, gross capital formation and government expenditure, believably, succinctly controls the effects and causes long term growth. This paper analyzed this effects for Kenya paying exceptional attention on their asymmetric effects. The most reliable and important results supported that positive asymmetries of financial development increases long run growth unlike the negative with reducing and weak effects. However, in case of financial dynamics and instabilities, economic growth responds negatively with a steep slump to shocks by declining financial development as positive gross capital formation shocks seems to plausibly control such nonlinear dynamics and positively causing growth. Also, sustainable inflation and prudent state expenditure spurs long term growth. Since this growth finance relationship supports the supply-leading hypothesis, there is need for specific financial development policies which would alongside support sustainable inflation and prudent expenditure if they are to spur real growth. Moreover, the financial risk managers are required to robustly prepare against the negative shocks by finance that have greater degenerating effects than by upturn from the positive shock.

scholarly journals The perspectives of long-term growth in Russia

2015 ◽  
Vol 65 (s1) ◽  
pp. 7-23 ◽  
Author(s):  
Georgy Idrisov ◽  
Sergey Sinelnikov-Murylev
Keyword(s):  
Economic Growth ◽  
Growth Rate ◽  
Economic Policy ◽  
Business Cycle ◽  
Productivity Growth ◽  
Government Spending ◽  
Long Run ◽  
Accelerate Growth ◽  
Budget Institutions

The paper analyses the inconsequence and problems of Russian economic policy to accelerate economic growth. The authors consider three components of growth rate (potential, Russian business cycle, and world business cycle components) and conclude that in order to pursue an effective economic policy to accelerate growth, it has to be addressed to the potential (long-run) growth component. The main ingredients of this policy are government spending restructuring and budget institutions reform, labour and capital markets reform as well as productivity growth.

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