Public expenditure and economic growth in developing countries
Provision of infrastructure services is required for economic growth and sustainable development especially for developing countries. The characteristics of public utilities and infrastructure as ‘public goods’ make them insufficiently provided without public investment.
As government’s expenditure increases over time, raising taxes to match government’s revenue with expenditure is highly subject to public resistance. Private participation in infrastructure investment has become a global trend to alleviate burden from public expenditure.
However, it has not been clear whether public or private investment on infrastructure would be more effective in terms of contribution to economic growth and social welfare. Answering this question would be highly beneficial in terms of setting the form of future co-operation and regulation of infrastructure investment.
The other important aspect of public expenditure is its effect on economic growth at sector level. Public spending in different sector could yield unequal effect on economic growth. Moreover, allocating public expenditure between consumption and investment could also create different impact on economic growth. Understanding this difference in the context of developing nations would indicate proper direction for government in efficiently allocating government budget to boost their economy.
The study focuses on disaggregated analysis of public consumption and investment in developing countries and their effect on economic growth. The role of their government and the private participation in infrastructure investment would also be examined.