The Effect of Public Sector Development Expenditures and Investment on Economic Growth: Evidence from Pakistan

Syed Shujaat AHMED, Asif JAVED

Abstract


Abstract. It is an established fact that there is strong association between investment and economic growth of a country but no such direct consensus had been developed on the type of investment. i.e. what are the different sectors in which investment has led to long term impact and did contributed to the growth. The current study in this regard will focus on investigating the relationship of Public Sector Development Programme (PSDP), Foreign Direct Investment (FDI) and Private Investment with the growth. The study will use data from 1980-81 to 2015-16 in this regard and employ Johansen cointegration to investigate the long run relationship. It is found that with foreign direct investment, health expenditure and transport and communication expenditure has negative relationship in the long run. Where as private investment, education expenditure and expenditure on housing has positive relationship with growth. Based on these findings recommendations were totally investment centric with primary focus on reduction in taxes and other barriers to bring in more investment in long run. Beside taxation, recommendations were made on administrative balance both in tax system and public sectors which were made part of provincial domain after 18th amendment.

Keywords. Public sector development programme, Foreign direct investment, Private investment.

JEL. D92, O40, H51, H52.


Keywords


Public sector development programme; Foreign direct investment; Private investment.

Full Text:


References


Ahmed, V., Abbas, A., & Ahmed, S. (2013). Public Infrastructure and Economic Growth in Pakistan: A Dynamic CGE-Micro Simulation Analysis, Springer, 117-143. doi. 10.1007/978-3-319-03137-8_5

Akram, M., & Khan, F.J. (2007). Health care services and government spending in Pakistan, PIDE Working Papers, No.32. [Retrieved from].

Ali, S. (2010). Does the choice of government expenditures affect poverty? Time series evidence from Pakistan, International Conference on Applied Economics. [Retrieved from].

Asghar, N., Awan, A., & Rehman, H. (2012). Government spending, economic growth and rural poverty in Pakistan, Pakistan Journal of Social Sciences, 32(2), 469-483.

Asghar, N., Azim, P., & Rehman, H. (2011). Impact of government spending in social sectors on economic growth: A case study of Pakistan, Journal of Business & Economics, 3(2), 214-234.

Ashghar, Z., & Zahra, M. (2012). A Benefit Incidence Analysis of Public Spending on Education in Pakistan Using PSLM Data, The Lahore Journal of Economics, 17(2), 111-136.

Aurangzeb, (2003). Relation between health expenditure and GDP in an augmented Solow Growth Model for Pakistan: An application of co-integration and error-correction modeling, The Lahore Journal of Economics, 8(2), 1-16.

Dickey, D.A., & Fuller, W.A. (1981). Likelihood ratio statistics for auto-regressive time series with a unit root. Econometrica, 49(4), 1057-1072. doi. 10.2307/1912517

Dritsakis, N., Varelas, E., & Adamopoulos, A. (2006). The main determinants of economic growth: An empirical investigation with Granger causality analysis for Greece. European Research Studies Journal, 9(3-4), 47-58.

Government of Balochistan, (2013). Balochistan Education Sector Plan 2013-18, Policy Planning and Implementation Unit, Education Department, Government of Balochistan.

Government of Khyber Pakhtunkhwa, (2015). Budget Strategy Paper 2015-16, Government of Khyber Pakhtunkhwa.

Government of KPK, (2010). Khyber Pakhtunkhwa Health Sector Strategy 2010-17, Government of Khyber Pakhtunkhwa.

Government of Sindh, (2012). Sindh Health Sector Strategy 2012-2020, Government of Sindh.

Government of Sindh, (2015). Budget Strategy Paper 2015-16 to 2017-18, Economic Reform Unit, Finance Department, Government of Sindh.

Government of the Punjab, (2015). Punjab Growth Strategy 2018: Accelerating Economic Growth and Improving Social Outcomes, Government of the Punjab.

Hakro, A.N., & Akram, M. (2007). The incidence of government expenditures on education and health: Microeconomic evidence from Pakistan, The Lahore Journal of Economics, 12(2), 27-48.

Hussain, F., Hussain, S., & Erum, N. (2008). Is defense expenditure pro poor or anti poor in Pakistan? An empirical investigation, Paper Presented at 30th AGM PIDE. [Retrieved from].

Hussain, F., Qasim, M.A., & Sheikh, K.M. (2003). An analysis of public expenditure on education in Pakistan, The Pakistan Development Review, 42(4), 771-780.

Iqbal, N., ud Din, M., & Ghani, E. (2013). Fiscal Decentralization and Economic Growth: Role of Democratic Institutions, Pakistan Institute of Developing Economics, Working Paper, No. 89. [Retrieved from].

Johansen, S. (1988) Statistical analysis of cointegrating vectors. Journal of Economic Dynamics and Control. 12(2-3), 231-254. doi. 10.1016/0165-1889(88)90041-3

Kalim, R., & Hassan, M.S. (2013). Military Expenditure and Poverty in Pakistan, Proceedings of 3rd International Conference on Business Management, [Retrieved from].

Kalim, R., & Hassan, M.S. (2014). Public defense spending poverty in Pakistan, Review of Public Economics, 211, 93-115. doi. 10.7866/HPE-RPE.14.4.3

Kelegama, S. (2012). Foreign Aid in South Asia: The Emerging Scenario, SAGE

Mallick, L., Das, P.K., & Pradhan, K.C. (2016). Impact of educational expenditure on economic growth in major Asian countries: Evidence from econometric analysis. Theoretical and Applied Economics, 22(2), 173-186.

National Association of Home Builders. (2009, July 30). Housing's Contribution to Gross Domestic Product. Retrieved February 12, 2010. [Retrieved from].

Pasha, H., Imran, M., Iqbal, A., Ismail, Z., Sheikh, R., & Sherani, S. (2011). Review and analysis of Pakistan’s public investment program, International Growth Centre, [Retrieved from].

PILDAT, (2012). Understanding Punjab Health Budget 2012-13: A Brief for Standing Committee on Health Provincial Assembly of the Punjab, Pakistan Institute of Legislative Development and Transparency.

RAFTAAR, (2015). Pakistan’s Public Expenditure: Insights & Reflections, Research & Advocacy for the Advancement of Allied Reforms.

SDPI, (2013). Managing Intra-Country Growth Disparities in South Asia, 6th South Asian Economic Summit. [Retrieved from].

Shahbaz, M., Afza, T., & Shabbir, M.S. (2013). Does defence spending impede economic growth? Cointegration and causality analysis for Pakistan, Defence and Peace Economics, 24(2), 105-120. doi. 10.1080/10242694.2012.723159

Shuaib, I., & Ndidi, N.D.E. (2015). Capital formation: impact on the economic development of Nigeria 1960-2013. European Journal of Business, Economics and Accountancy, 3(3), 23-40.

Wahab, M.A., Ahmed, V., & Javed, A. (2013). Human resource development, government spending and productivity of human capital in Pakistan, SAARC Journal of Human Resource Development, 9(1), 32-48.

Zeshan, A., & Ahmed, V. (2014). How spending on defense versus human capital impacts economic productivity in South Asia?, International Journal of Economics and Empirical Research, 2(2), 74-83.




DOI: http://dx.doi.org/10.1453/jepe.v4i2.1347

Refbacks

  • There are currently no refbacks.




.......................................................................................................................................................................................................................................................................................................................................

Journal of Economics and Political Economy - J. Econ. Pol. Econ. - JEPE - www.kspjournals.org

ISSN: 2148-8347

Editor: jepe@ksplibrary.org   Secretarial: secretarial@ksplibrary.org   Istanbul - Turkey.

Copyright © KSP Library