Government Expenditure and Inclusive Growth: Advanced vs. Developing Economies

Byoung Hoon Seok and Donghyun Park
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Byoung Hoon Seok: Department of Economics, Ewha Womans University, Seoul, Republic of Korea
Donghyun Park: Economic Advisor, Asian Development Bank, Manila, Philippines

No 2508, Economic Growth Centre Working Paper Series from Nanyang Technological University, School of Social Sciences, Economic Growth Centre

Abstract: This study analyzes the effects of government expenditure composition on economic growth and income inequality in 91 countries from 1990 to 2023, using a Panel Vector Autoregression (PVAR) model. The findings reveal notable differences between advanced and developing economies. In advanced economies, only infrastructure investment consistently promotes growth, while education spending reduces inequality and healthcare expenditures may increase disparities over time. In developing economies, infrastructure investment has a stronger and more persistent impact on growth, but education and healthcare spending exhibit limited redistributive effects. Social transfers show mixed results, with inefficiencies sometimes leading to worsening income inequality. These results highlight the importance of context-specific fiscal policies, ensuring that spending priorities align with national development goals to achieve both economic expansion and equitable distribution.

Keywords: government expenditure; inclusive growth; Panel Vector Autoregression (search for similar items in EconPapers)
JEL-codes: E62 H50 O11 O43 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2025-08
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Persistent link: https://EconPapers.repec.org/RePEc:nan:wpaper:2508

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