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Government Expenditure and Inclusive Growth: Advanced vs. Developing Economies

Author

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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)

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.

Suggested Citation

  • Byoung Hoon Seok & Donghyun Park, 2025. "Government Expenditure and Inclusive Growth: Advanced vs. Developing Economies," Economic Growth Centre Working Paper Series 2508, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    • Handle: RePEc:nan:wpaper:2508
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    References listed on IDEAS

    as
    1. Love, Inessa & Zicchino, Lea, 2006. "Financial development and dynamic investment behavior: Evidence from panel VAR," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(2), pages 190-210, May.
    2. Muhammad Kamran & Muhammad Zahid Rafique & Abdul Majeed Nadeem & Sofia Anwar, 2023. "Does Inclusive Growth Contribute Towards Sustainable Development? Evidence from Selected Developing Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 165(2), pages 409-429, January.
    3. Amponsah, Mary & Agbola, Frank W. & Mahmood, Amir, 2023. "The relationship between poverty, income inequality and inclusive growth in Sub-Saharan Africa," Economic Modelling, Elsevier, vol. 126(C).
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    More about this item

    Keywords

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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