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The composition of public expenditures and economic growth: evidence from Pakistan

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Purpose ‐ This study is an attempt to examine the role of sub categories of government expenditures under democratic and military regimes in Pakistan for the period of 1972-2009. Design/methodology/approach ‐ This study exercised autoregressive distributed lag (ARDL) model. Findings ‐ The results show that contractionary fiscal expansion occurs in Pakistan. Moreover, the coefficient of development expenditure positively affects economic growth. It supports the public capital hypothesis that states that public and private investments are complements to each other. The results also show that current expenditure does not contribute to economic growth. Practical implications ‐ The study recommends that for the purpose of macroeconomic stability, government should reduce its unproductive expenditure and should enhance its resource mobilization. Originality/value ‐ This study is an attempt to examine the dynamic relationship between the composition of government expenditures and economic growth for Pakistan over the period of 1972-2009. The work is different from already existing literature in Pakistan. The authors' investigated the impact of different categories of government expenditures on economic growth, which has not been studied previously. Moreover, this study included a set of control variables by performing sensitivity analysis which is a significant contribution to the existing literature.
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Keywords: Development; Political economics

Document Type: Research Article

Publication date: September 20, 2013

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