Impact of Government Spending In Social Sectors on Economic Growth: A Case Study of West African Economic and Monetary Union Countries

This study aims to investigate the short-run and long-run effects of government’s social expenditure proxies, namely education, and health spending on economic growth during the period 1985 - 2019 in West African Economic and Monetary Union. Using Auto Regressive Distributed Lag model (ARDL) based on panel data, the results of the study reveal that in short-run, government spending in social sectors has no significant impact on economic growth but in long-run the effects of education and health expenditures on the economic growth are significantly positive.

The contribution of tax expenditure in fiscal consolidation in post-crisis economies: a case study of the context in Portugal

In this research, we analyse the use of fiscal expenditure as an instrument of fiscal consolidation policy. Portugal was subject to the financial assistance programme (PAEF) articulated with the IMF, the European Commission and the European Central Bank between 2010 and 2014. The objective is to analyse the evolution of fiscal expenditure in the following four years, after the end of that term programme, that is, between 2015-2018. The outcome is to know if the policy of reducing fiscal expenditure implemented in the years in which the programme was in force (2010-2014), continued into the following four years. We compared this evolution with the evolution of direct expenditure, based on two main axes: economic expenditure and social expenditure. The data collection technique is used through document research, and the data obtained was from information provided by national, European statistical authorities and secondary sources of information. It is concluded that, in the 2014-2018 period, the increase in public revenue, due to the decrease in tax expenditure, did not evolve consistently. In 2014-2018, direct public expenditure did not follow the same pattern as in the previous years of 2011-2014, given the functional equivalence of the two types of expenditure. Finally, to observe the relationship between the level of fiscal consolidation, carried out between the years 2010 and 2018, and the behaviour of tax revenue and expenditure, the Scheffé test was performed on the averages of the variables Total Revenue and Expenditure, and Tax Revenue and Expenditure. This was applied in order to observe if the averages of the variables are significantly relevant for the level of fiscal consolidation or if there are other variables, equally important, that were not taken into account in the study, but that had a preponderant role (such as the economic context). We have to statistically conclude that both the revenue and expenditure averages and the percentage averages are not all equal, as they are, in fact, all different between the groups analysed. In order to clarify if the differences in revenue and expenditure and in the respective percentages are statistically significant or if, on the contrary, they are merely eventual, we previously verified their applicability through the assumptions of normality and homoscedasticity of each of the data sets, using the ANOVA test (Fisher, 1918). We observed that for both the amounts of revenue and expenditure, as well as the percentages, the p-value observed in the ANOVA test was equal to 0.000 (i.e. less than 0.050), implying the rejection of the null hypotheses and the acceptance of the alternative hypotheses, according to which the average values of the amounts of revenue and expenditure, and the average values of the percentages are not all equal. The general conclusion is that there was budget consolidation, but this must have been due to other factors, such as the economic environment, since there is no direct relationship between revenue, fiscal expenditure and budget consolidation in any of the periods studied.

Public and Private Social Welfare

This chapter contributes to the discussion of public and private social welfare by drawing together recent information on these different ways of providing social benefits. It presents data on public social expenditure for 2015–17 and accounts for the impact of the tax system and private social expenditure to develop indicators on net social expenditure for 2015. The chapter shows that conventional estimates of gross public spending differ significantly from estimates of net public spending and net total social expenditure, leading to an incorrect measurement and ranking of total social welfare effort across countries.Just as importantly, the fact that total social welfare support is incorrectly measured implies that the outcomes of welfare state support may also be incorrectly measured. Thus, the main objectives of the chapter include considering the implications of this more comprehensive definition of welfare state effort for analysis of the distributional impact of the welfare state and for an assessment of the efficiency and incentive effects of different welfare state arrangements.

Social Expenditure and Welfare State Financing

This chapter focuses on both the expenditures and the revenues of the welfare state. Using the latest data available, it depicts and analyses major developments in social spending and public revenues in twenty-one advanced Western democracies since 1980. The entry discusses measurement issues, depicts the determinants of cross-national differences in spending and revenue levels identified in the literature, and sheds light on the impact of social spending and taxation on social outcomes, such as income inequality. It is argued that spending and revenue figures, irrespective of several shortcomings, provide important indicators of both the logic and pattern of welfare state development.

The Social Rights of Citizenship

This chapter reviews the welfare state literature which conceives of welfare state entitlements as ‘social rights of citizenship’, following the conceptualization of T. H. Marshall in his 1950 essay on citizenship. Beginning with Marshall’s influential essay, the first section of the chapter discusses how social rights of citizenship have been defined in the literature on comparative welfare states. Marshall argues that the defining feature of the social rights of citizenship is that they entail a claim for public transfers, goods, and services ‘which is not proportionate to the market value of the claimant’. Early quantitative studies of welfare state development measured welfare state effort with social expenditure, which was seen as a proxy for the variables of real interest, social rights, or welfare state redistribution. In the 1980s, ambitious efforts to measure social rights through time and across countries were initiated, though these measures did not find their way into the public domain until after 2000. These measures focus on rights to welfare state transfers and thus neglect services. The chapter ends with reviews of the literature on the causes of variations in social rights across countries and through time and on the outcomes of variations in social rights.

European and National Social Policy

This chapter portrays the development of social policy managed by the European Union, focuses on principles of steering in the EU’s social policy, and explores the distribution of power between national social political action in the member states and European social policy since 1957. The data show that the EU has been able to gain influence through regulatory social policies and soft governance instruments. As pertaining to social services, social expenditure, and redistributive concepts, however, the EU only plays a marginal role. The predominance of national social policy and the limited role of European social policy have been largely due to socio-economic diversity of the EU’s member state, heterogeneous welfare states, institutional obstacles of policymaking in the EU, and powerful national constraints.

The Impact of Tax and Expenditures Policies on Income Distribution: Evidence from Pakistan

Tax and social expenditure policies have a crucial role in income distribution. This study explores the potential role of taxation and social expenditure policies in income redistribution in South Asia. For this purpose, empirical analysis is conducted by Fixed Effect (FE) and Instrumental Variable (IV) FE models. The analysis suggests that both taxation and social expenditures policies effectively reduce income inequality in South Asia. These findings indicate that social spending and taxation can be used as a policy tool to redistribute income in developing countries. The results also indicate that higher social spending, increased direct taxes, and more reliance on foreign debts can ameliorate the income distribution. Based on the results, it can be suggested that for this region, with the low level of taxes, direct taxes, a large informal economy, and other weak features of tax administration, more reliance on direct taxes and social expenditure policies should be the primary tool for income redistribution.JEL Classification: H2, H5, I3How to Cite:Khan, S., & Padda, I. U. H. (2021). The Impact of Tax and Social Expenditure Policies on Income Distribution: Evidence from South Asia. Etikonomi, 20(2), xx – xx. https://doi.org/10.15408/etk.v20i2.18121.