Public Spending, Income Inequality and Economic Growth in Asian Countries: A Panel GMM Approach

Abstract

This paper offers an empirical examination of the relationship between government spending’s, income inequality, and economic growth by using the case of 19 Asian countries from 2002 to 2017. For this purpose, the paper uses robust difference-GMM estimation and panel granger causality test. We found that gross domestic investment and regulatory quality are the main variables that contribute to these countries' economic growth. While current government consumption reduces economic growth. Also, government expenditure on education and regulatory quality granger cause economic growth in these countries. However, the effect of government expenditure on education on economic growth is not significant. So, to increase their economic growth, this study recommends these countries' governments to encourage gross domestic investment, maintain regulatory quality and reduce their current consumption. This study also concludes that income inequality has no impact on these countries' economic growth for this period.

Public Expenditures, Economic Growth and Income Inequality: Empirical Evidence from the Commonwealth of Independent States

“…According to the findings obtained from Table 6, a one-way causality relationship from public expenditures to economic growth was determined at a significance level of 10% for Armenia and 5% for Belarus and Kazakhstan. This result is in coincidence with the studies of Holmes and Hutton (1990), Alexiou (2009), Alam et al (2010), Gurgul et al (2012), Dincă and Dincă (2013), Christie (2014), Abdieva et al (2017), Gnangoin et al (2019) and Kutasi and Marton (2020). However, there was no causal relationship from economic growth to public expenditure in any country.…”

“…The selected empirical literature on the relationship between public expenditures and economic growth is presented in Table 1. According to Table 1, the findings obtained from the studies of Holmes and Hutton (1990), Alexiou (2009), Alam, Sultana, and Butt (2010), Gurgul et al (2012), Dincă and Dincă (2013), Christie (2014), Abdieva et al (2017), Gnangoin, Du, Assamoi, Edjoukou, and Kassi (2019), and Kutasi and Marton (2020) are such as to support the Keynesian hypothesis. On the other hand, the studies of Ahsan, Kwan, and Sahni (1996), Al-Faris (2002), Rehman, Iqbal, and Siddiqi (2010), Ağayev (2012), Kumar, Webber, andFargher (2012), andSrinivasan (2013) support the Wagner hypothesis.…”

Drivers of credit union penetration: An international analysis

“…However, we find the two‐step difference GMM approach a sufficient method that satisfies the objectives of the study. The use of two‐step difference GMM is consistent with Adeleye, Adedoyin, and Nathaniel (2020); Abrate, Piacenza, and Vannoni (2009); Waziri, Mohamed Nor, Raja Abdullah, and Adamu (2015); Chen and Kao (2014); Aali‐Bujari, Venegas‐Martínez, and Pérez‐Lechuga (2016); Siddiqui and Ahmed (2013); and Gnangoin, Du, Assamoi, Edjoukou, and Kassi (2019).…”

Government Size, the Composition of Public Spending and Economic Growth in Netherland

“…The main objective of this study was to empirically investigate the relationship between the government spending, government size and the economic growth of the Netherlands. The discussion on the relationship of government spending and size and economic growth has been the focus of attention in developing and emerging countries (Akram & Rath, 2019;Gnangoin, Du, Assamoi, Edjoukou, & Kassi, 2019). The study by Nirola and Sahu (2019) evaluated the impact of governmental size on the economic growth across 23 states of India, ranging for the period between 2005 and 2014.…”