This paper examines the role of the state in economic development. In particular, we test the impact of aggregated and sectoral government expenditures on economic performance in developing countries. Our findings suggest that total government expenditures are negatively related to economic development in both low income and middle income developing countries. However, we find particular evidence that government expenditures prove to be more beneficial for growth when a country is characterized by a well-functional institutional design.
In contrast to previous studies, we do not find positive and significant results for sectoral government expenditures. In fact, our findings suggest that transport and communication, defense and health expenditures are negatively related to economic development. At the same time, public and private investments appear to be positively related to economic development throughout our analysis. Therefore, we conclude that – instead of government expenditures – stimulating investments and institutional reforms should play a major part on the political agenda of developing countries.
Table of Contents
- Abstract
- 1. Introduction
- 2. Literature Review
- 2.1 Theories of Economic Development
- 2.2 The Role of the State in Economic Development
- 2.3 Government Expenditures, Institutional Quality and Growth
- 2.4 Sectoral Government Expenditures and Growth
- 3. Data and Methodology
- 3.1 Economic Model
- 3.2 Data Sources
- 4. Results
- 4.1 Baseline Results
- 4.2 Robustness Tests
- 5. Policy Implications and Concluding Remarks
- 6. Limitations
- 7. References
- 8. Appendix
Objectives and Key Themes
This paper investigates the complex relationship between government expenditures and economic development in developing countries. It aims to analyze the impact of both aggregated and sectoral government spending on economic performance, considering the crucial role of institutional quality. The study seeks to provide a comprehensive understanding of the interplay between these factors and offer policy implications for developing nations.
- The impact of total government expenditures on economic growth in developing countries.
- The influence of sectoral government expenditures (e.g., transport, defense, health) on economic development.
- The role of institutional quality in mediating the effect of government spending on economic outcomes.
- A comparison of findings with existing literature on the subject.
- Policy recommendations for developing countries based on the empirical findings.
Chapter Summaries
1. Introduction: This chapter sets the stage for the research by discussing the ongoing debate surrounding the role of the state in economic development. It highlights contrasting views on the effectiveness of government interventions and expenditures, referencing studies that support both positive and negative correlations between government spending and economic growth. The chapter emphasizes the ambiguous findings concerning the impact of sectoral government expenditures and introduces the paper's objective: to analyze the combined effect of aggregated government expenditures, sectoral spending, and institutional quality on economic development in a panel of developing countries.
2. Literature Review: This chapter provides a comprehensive overview of existing literature on economic development, focusing on relevant theories, the role of the state, and the impact of government expenditures. It examines various perspectives on the relationship between government spending and growth, including those focusing on total government expenditures and the impact of different sectors. The chapter also explores the significance of institutional quality in shaping the effectiveness of government interventions, creating a theoretical framework for the empirical analysis conducted in later chapters.
3. Data and Methodology: This chapter details the data and econometric methods employed in the study. It explains the economic model used to analyze the relationship between government expenditures, institutional quality, and economic development. The chapter describes the data sources used, including the specific variables and their measurement, and justifies the choice of econometric techniques employed to analyze the data. A thorough explanation of the methodologies ensures the transparency and reproducibility of the research.
4. Results: This chapter presents the empirical findings of the study. It details the baseline results and discusses various robustness tests performed to validate the initial findings. The results offer insights into the relationship between total government expenditures, sectoral expenditures, institutional quality, and economic development in the selected panel of developing countries, revealing any significant correlations and offering preliminary conclusions based on the empirical evidence.
6. Limitations: This chapter critically assesses the limitations of the study. It acknowledges potential shortcomings in data availability, methodological choices, and the scope of the analysis. These limitations are explicitly stated to provide context for interpreting the findings and to suggest areas for future research. By acknowledging these limitations, the study strengthens its credibility and methodological rigor.
Keywords
Government expenditures, institutional quality, economic development, developing countries, sectoral spending, economic growth, investment, institutional reforms.
Frequently Asked Questions: A Comprehensive Language Preview
What is the purpose of this research paper?
This research paper investigates the complex relationship between government expenditures and economic development in developing countries. It aims to analyze the impact of both aggregated and sectoral government spending on economic performance, considering the crucial role of institutional quality. The study seeks to provide a comprehensive understanding of the interplay between these factors and offer policy implications for developing nations.
What are the key themes explored in the paper?
The key themes include the impact of total government expenditures on economic growth, the influence of sectoral government expenditures (e.g., transport, defense, health), the role of institutional quality in mediating the effect of government spending, a comparison of findings with existing literature, and policy recommendations for developing countries.
What is included in the Table of Contents?
The table of contents includes an abstract, introduction, literature review (covering theories of economic development, the role of the state, government expenditures, institutional quality and growth, and sectoral government expenditures and growth), data and methodology (including the economic model and data sources), results (including baseline results and robustness tests), policy implications and concluding remarks, limitations, references, and an appendix.
What is covered in the Literature Review chapter?
The literature review provides a comprehensive overview of existing research on economic development, focusing on relevant theories, the role of the state, and the impact of government expenditures. It examines various perspectives on the relationship between government spending and growth, including those focusing on total government expenditures and the impact of different sectors. It also explores the significance of institutional quality in shaping the effectiveness of government interventions.
How are the data and methodology described?
The chapter details the data and econometric methods used in the study. It explains the economic model used to analyze the relationship between government expenditures, institutional quality, and economic development, describes the data sources, and justifies the choice of econometric techniques. The aim is to ensure transparency and reproducibility.
What are the main findings presented in the Results chapter?
This chapter presents the empirical findings, detailing the baseline results and various robustness tests performed to validate them. The results offer insights into the relationship between total government expenditures, sectoral expenditures, institutional quality, and economic development, revealing any significant correlations.
What limitations of the study are acknowledged?
The limitations chapter critically assesses potential shortcomings in data availability, methodological choices, and the scope of the analysis. This enhances the study's credibility and methodological rigor.
What are the keywords associated with this research?
The keywords are: Government expenditures, institutional quality, economic development, developing countries, sectoral spending, economic growth, investment, and institutional reforms.
What are the chapter summaries?
The document provides detailed summaries for each chapter, outlining the key content and purpose of each section. These summaries provide a concise overview of the entire research process.
Where can I find more information?
The full research paper would provide the complete details and analysis. The provided preview gives a comprehensive overview of the key aspects of the study.
- Quote paper
- David Schmengler (Author), 2018, The Role of the State in Economic Development. Do Government Expenditures Promote Growth in Developing Countries?, Munich, GRIN Verlag, https://www.grin.com/document/921004
