The Effect of Governments Current Expenditure Increase on the State Economic Growth in a Simple Economic Model (in Persian)

Mehdi Assali
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Mehdi Assali: Iran

The Journal of Planning and Budgeting (٠صلنامه برنامه ریزی و بودجه), 2004, vol. 9, issue 2, 3-19

Abstract: This paper tries to survey the relationship between national revenue growth with the governments current expenditure, which increases under the effect of the governments transfer payments composed of basic goods subsidies. The paper uses a dynamic two-sector equation that was formulated according to Irans economic structure characteristics. The solution of the model by way of reduced form equations for the important variables of the model such as Y (production), I (investment), and LD (demand for labor force) show that in the hypothesized situation of the economic model, the increase of the GC current budget leads to the decrease in production, investment, and labor demand. As this trend has been continuing during the past three decades, the results of this survey briefly express the necessity of revision in the methods of distributing subsidies and making them target-oriented with the aim of transferring them to low-income households and directing the financial resources of the country to investment. This becomes more crucial when it is viewed form the standpoint of the fourth development plans emphasis on the speedy economic growth and decrease of unemployment.

Date: 2004
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