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Explaining The Growth Of Government Spending In South Africa

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Listed author(s):
  • James Alm
  • Abel Embaye

Abstract

What determines government spending in South Africa? The paper estimates the determinants of real per capita government spending in the Republic of South Africa using annual data for the period 1960-2007, a tumultuous period during which South Africa experienced a variety of internally imposed changes ("e.g." the abolition of apartheid, changes in political institutions) and externally generated shocks ("e.g." war, oil shocks). Using multivariate cointegration techniques, we find that per capita government spending, per capita income, the tax share and the wage rate are cointegrated, a result that supports the notion that government spending is associated not only with per capita income and the true cost of government service provision as given by the wage rate but also with the fiscal illusion caused by budget deficits. We also find evidence that per capita government spending was positively affected by external shocks. These external shocks seem to play a significant role in explaining the dynamics of government spending growth. Copyright (c) 2010 The Authors. Journal compilation (c) 2010 Economic Society of South Africa.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1813-6982.2010.01242.x
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Article provided by Economic Society of South Africa in its journal South African Journal of Economics.

Volume (Year): 78 (2010)
Issue (Month): 2 (06)
Pages: 152-169

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Handle: RePEc:bla:sajeco:v:78:y:2010:i:2:p:152-169
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Find related papers by JEL classification:
  • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
  • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
  • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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Cited by:

  1. Kojo Menyah & Yemane Wolde-Rufael, 2012. "Wagner'S Law Revisited: A Note From South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 80(2), pages 200-208, 06.
  2. Mabugu, Ramos & Robichaud, Veronique & Maisonnave, Helene & Chitiga, Margaret, 2013. "Impact of fiscal policy in an intertemporal CGE model for South Africa," Economic Modelling, Elsevier, vol. 31(C), pages 775-782.
  3. Alimi, R. Santos, 2014. "A Time Series and Panel Analysis of Government Spending and National Income," MPRA Paper 56994, University Library of Munich, Germany.

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