The impact of public expenditure on economic growth: A review of international literature

Sheilla Nyasha and Nicholas Odhiambo

No 25742, Working Papers from University of South Africa, Department of Economics

Abstract: In this paper, theoretical and empirical literature on the relationship between governmentexpenditure and economic growth has been reviewed in detail. Specific focus was placed on thereview of literature that assessed the impact of government spending on economic growth. Theliterature reviewed has shown that the impact of government spending on economic growth is notclear cut. It varied from positive to negative; with some studies even finding no impact. The studyidentified a number of factors that could be driving this inconsistency in conclusions by variousstudies on the same topic. Differences in the study samples, study periods, methodologies employedand the proxies for government expenditure have been the key causes of varying results andconclusions on the nature of the impact of government spending on economic growth. This study hasalso revealed that as economists get desperate in concluding the government expenditure-economicgrowth debate, they are increasingly disaggregating the government expenditure into variouscomponents and test the impact of each component on economic growth. The practice has, however,not been able to move the debate closer to its conclusion, as the results from such practice are alsowidely varying. Although the impact of government spending on economic growth was found to beinconclusive, the scale tilts towards a positive impact.

Keywords: Public Expenditure; Government Expenditure; Government Size; Economic (search for similar items in EconPapers)
Date: 2019-08
New Economics Papers: this item is included in nep-pbe
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Citations: View citations in EconPapers (9)

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Journal Article: The Impact of Public Expenditure on Economic Growth: A Review of International Literature (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:uza:wpaper:25742

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