Public Spending and Inclusive Growth: An Empirical Analysis Across Economies

Gazi Salah Uddin, Anh H. Le, Md. Bokhtiar Hasan, John Beirne and Donghyun Park
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Gazi Salah Uddin: Linköping University
Anh H. Le: Goethe University Frankfurt
Md. Bokhtiar Hasan: Islamic University

No 815, ADB Economics Working Paper Series from Asian Development Bank

Abstract: We investigate the effects of different components of government spending on inclusive growth. More specifically, we consider the inclusive impact of public spending on environmental protection, health, education, housing, and social protection, all of which can conceivably promote inclusive growth. For our empirical analysis, we apply panel regressions and local projections to a comprehensive database of 191 economies between 1980 and 2023. Our evidence indicates that equity-promoting government spending reduces income inequality, as measured by the Gini index, and improves human development indicators. Moreover, our analysis reveals that poorer households benefit disproportionately, suggesting that targeted fiscal expenditures can promote equity. Notably, the inclusive effects are most pronounced in advanced economies, where robust fiscal frameworks support and amplify such effects. In contrast, emerging and developing economies experience more modest gains. Overall, the findings highlight the importance of well-designed public spending programs for equitable growth. Finally, we conduct state-dependent local projections and regional subsample analysis.

Keywords: government spending; inclusive growth; income inequality; developed and developing economies (search for similar items in EconPapers)
JEL-codes: D63 E62 O23 O47 (search for similar items in EconPapers)
Pages: 60
Date: 2025-10-29
New Economics Papers: this item is included in nep-pke
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