The Impact of Nonliner of Government Public Expenditures on Social Welfare (NARDL Approach)

Document Type : Research Paper

Authors

1 Department of Economics, Lorestan University

2 Associate Professor of Economics, Lorestan University

3 Professor of Bu Ali sina Univesity

4 Assistant Professor of lorestan university

Abstract

The government tasks in regard to justice and increase social welfare is offering services and public finance, maintain order through enforce laws and good governance in the regulation of relations between governmental and public relations together with the help of the judicial system. The purpose of this study is to investigate the impact of government spending on public affairs and related chapters, including: legislation, public services, judiciary, financial services and science development on the Amartya Sen social welfare index during business cycles in the Iranian economy. In this regard, the nonlinear self-explanatory model with wide intervals (NARDL) has been used to estimate time series data during the period of 1973-2019. The results show that in Iran, the positive shock of government spending in the science, legislative and public development chapters during business cycles has increased social welfare and in the judicial season decreased social welfare. The negative shock of government expenditures in public affairs and legislative, public and financial services chapters during business cycles and judicial chapter in recesion periods have significantly increased social welfare, significantly. Also, the negative shock of government expenditures in the science development chapter during recesion and boom, respectively, has increased and decreased Social welfare significantly. Thus, government Expenditure on public affairs and related sub-chapters during business cycles has had asymmetric effects on social welfare.

Keywords

Main Subjects


  1. Agenor, P.R. (2002). Does Globalization Hurt the Poor? The World Bank Washington DC, 20433, 1-51.
  2. Ahmadvand, N., Alizadeh, M., Fotros, M. H., & Delfan, M. (2020). Achieving the Optimal share of Government Expenditures in GDP with the Aim of Maximizing Social Welfare (With Emphasis On the Affairs and Seasons of the State Budget), Social Welfare Quarterly, 20 (79), 153-195. (In Persian)
  3. Afonso, A., Agnello, L. & Furceri, D. (2010). Fiscal Policy Responsiveness, Persistence and Discretion. Public Choice.
  4. Armey, R. (1995). The Freedom Revolution. Washington DC: Rognery Publishing Co.
  5. Acemo─člu, D., Johnson, S., & Robinson, J. (2005). Institutions as A Fundamental Cause of Long-Run Growth, Philippe Aghion and Steven N. Durlauf Eds.
  6. Amini, A., & Moradzadeh, S. (2015). Analyzing the Impact of Trade Liberalization on the Unemployment Rate: A Case Study of Selected Developing Countries, Quarterly Journal of Economic Sciences, 9 (31), 93-77. (In Persian)
  7. Amiri, H., Shahnazi, R., Dehghani Shabani, Z., & Naderan, E. (2012). Public Sector Economics, Organization for the Study and Compilation of University Humanities Books, Humanities Research and Development Center, Tehran: Publisher of Hozeh and University Research Institute. (In Persian)
  8. Alam, M.I., & Quazy, R.M. (2003). Determinant of Capital Flight: An Econometric Case Study of Bangladesh, Review of Applied Economics, 17, 85-103
  9. Auerbach, A. J., & Gorodnichenko, Y. (2012). Measuring The Output Responses to Fiscal Policy. American Economic Journal: Economic Policy, 4(2), 1-27.
  10. Barro, J. R., & Sala-i-Martin, X. (1995). Economic Growth .New York: McGraw-Hill, xviii, 539.
  11. Baum, A., & Koester, G. B. (2011). The Impact of Fiscal Policy On Economic Activity Over the Business Cycle Evidence from A Threshold VAR Analysis. Discussion Paper Series 1: Economic Studies,8.
  12. Banerji, A., Dolado, J., Galbraith, J. W., & Hendry, D. F. (1993). Coe integration, Error Correction, and the Econometric Analysis of Non-Stationary Data, Oxford University Press.
  13. Bakhtiari, S., Movaied Far, R., & Sarkhosh sara, A. (2014). Analyzing the Impact of Government Expenditure on Development and Welfare Components: A Comparative Study of Developed and Developing Countries. Journal of Economy and regional Development, 21 (8), 24-48. (In Persian)
  14. Blanchard, O., (1990). Can Severe Fiscal Contractions Be Expansionary? Tales of Two Small European Countries: Comment. NBER Macroeconomics, 5, 111–116.
  15. Baumol, W. (2002), The Free-Market Innovation Machine: Analyzing the Growth Miracle of Capitalism, Princeton: Princeton University Press.
  16. Bulir, A. (2001). Income Inequality: Does Inflation Matter? IMF Working Paper, 48, 45-63.
  17. Bouthevillain, C., & Dufrénot, G. (2011). Are The Effects of Fiscal Changes Different in Times of Crisis and Non Crisis? The French Cas. Dalloz Revue D'économie Politique, 121, 371-407.
  18. Cooley, T., & Prescott, E. (1995). Economic Growh and Busines Cycle. In. T, Cooley, ed, Frontier of Busines Cycle Research, Princeton Unversity Press,1-38.
  19. Darby, J., & Melitz, J. (2008). Social Spending and Automatic Stabilizers in The OECD. Economic Policy, 23 (56), 715–56.
  20. Davies, A. (2009). Human Development and the Optimal Size of Government. Journal of Socioeconomics, 38, 326-330.
  21. Del Angizan, S., Poshte keshi, M., & Nazari, S. (2017). The Impact of Governance Quality, Urbanization Rate and Economic Freedom on Income Inequality, First International Conference on Economic Planning, Sustainable and Balanced Regional Development, Approaches and Applications, University of Kurdistan. (In Persian)
  22. Enisan Akinlo, A., & Olayemi Jemiluyi. O. (2018). Government Expenditure and Economic Growth Nexus in Nigeria: Evidence from Nonlinear ARDL and Causality Approaches. Eview of Innovation and Competitiveness, 4 (2), 5- 25.
  23. Feshari, M. (2017). A Study of the Periodic Nature of Government Expenditure Shocks on Iran's Economic Growth (Markov Nonlinear Approach to Markov Rotation Model), Econometric Modeling Quarterly, 2 (2), 116- 89. (In Persian)
  24. Furceri, D., & Zdzienicka, A. (2010). The Effects of Social Spending On Economic Activity: Empirical Evidence from A Panel of OECD Countries. OECD and University of Palermo, 1-30.
  25. Fournier, J.M., & Johansson, A. (2016). The Effect of the Size and the Mix of Public Spending on Growth and Inequality. Organization of Cooperation and Development Economies Organization for Economic Co-operation and Development, Economics Department Working Paper, No. 1344.
  26. Forte, F., & Magazzino, C. (2011). Optimal Size Government and Economic Growth in EU Countries. Article in Economic Political.
  27. Gavin, M., & Perotti, R. (1997), Fiscal Policy in Latin America, in B. Bernanke and J. Rotemberg, eds., NBER Macroeconomics Annual.
  28. Ghasemi, M., & Mohajeri, P. (2015). Investigating the Cyclical Behavior of Fiscal Policy in Iran. Journal of Economic Research, 15 (56), 104-75. (In Persian)
  29. Galal Eid, A., & Awad, I.L. (2017). Government Expenditure and Private Sector Growth in Saudi Arabia: A Markov Switching Model Analysis. Economic, 22(2), 83-104.
  30. Granger, C. W., & Yoon, G. (2002). Hidden Integration. University of California San Diego. Economics Working Paper Series, 2.
  31. Haile, F., & Nino-Zarazua, M. (2018). Dose Social Spending Improve Welfare in Low-Income and Middle Income Countries? Journal of International Development, 30, 367–398.
  32. Hasnul, A.G. (2016). The Effects of Government Expenditure On Economic Growth: The Case of Malaysia, INCEIF, Global University of Islamic Finance, MPRA Paper, No. 71254.
  33. Hosseini, S. M., Abdi, A., Gheibi, A., & Fadaei, I. (2008). The Combination of the Components of Government Spending and its Impact on Economic Growth and the General Government Budget Chapters, journal to Research and Economic Policies, 16 (48), 63-37. (In Persian)
  34. Isazadeh, S., & Ahmadzadeh, A. (2009). Investigating the Effect of Institutional Factors on Economic Growth with Emphasis on Governance Institutions (Interstate Case Study for 1996-2015). Iranian Journal of Economic Research, 13 (40). 28-1. (In Persian)
  35. Jouini, J. (2018). Measuring The Macroeconomic Impacts of Fiscal Policy Shocks in The Saudi Economy: A Markov Switching Approach. Romanian Journal of Economic Forecasting, Xxi (4). 55-70.
  36. Joharji, G, Starr, M. (2011). Fiscal Policy and Growth in Saudi Arabia. Review of Middle East Economics and Finance, 6(3), 24-45.
  37. Kaur, B., Misra, S., & Suresh, A. K. (2013). Cyclicality of Social Sector Expenditures: Evidence from Indian States. Reserve Bank of India Occasional Papers. 34(1 & 2). 1-36.
  38. Khanzadi, A., Fattahi, Sh., & Moradi, S. (2014). Investigating the Effects of Government Health Expenditures on Human Development in Iran. Quarterly Journal of Economics and Modeling, Shahid Beheshti University, 7 (25), 149-130. (In Persian)
  39. Kaldor, M. (1976). The military in development. World Development, 459-482.
  40. Kormendi, R. C., & Meguire, P. (1986). Government debt, Government Spending, and Private Sector Behavior: Reply. American Economic Review, 76(5), 11801187.
  41. Knight, J., & Sabot, R.H. (1983). Educational Expansion and the Kuznets Effect. American Economic Review, 73(5), 1132-1136.
  42. MCCulloch, N., & Winter, L., & Cirera, X. (2003). Trade Liberalisation and Poverty: A Handbook. Centre for Economic Policy Research, 1-384.
  43. Monnin, P. (2014). Inflation and Income Inequality in Developed Economies. CEP Working Paper, 653, 23-45.
  44. Munene, M.J., Mbuthia, A., & Manyasa, E. (2015). The Optimal Size of Goverment Expenditure and Economic Growth in KENYA 1963 – 2012, A Research Project Submited to The Department of Economic Theory in Partial Fulfillment of the Requrements for a Ward of the Degree of Masters in Economics of Kenyatta University, 1-47.
  45. Menla, A. F., & Dimitrakib, O. (2014). Military Spending and Economic Growth in China: A Regime-Switching Analysis. Applied Economics, 46(28), 3408-3420.
  46. Mahmoudzadeh, M., Sadeghi, S., &Sadeghi, S. (2011). The Effect of Financial Expenditures on Private Investment in Iran (C.O.E. Hypothesis Test). Journal of Planning and Budget, 16 (2), 146-131. (In Persian)
  47. Mohebbi, A. (2008). Economic Security Measures. Quarterly Journal of Legal Perspectives,202-226. (In Persian)
  48. Nademi, Y., & Baharvand, V. (1397). Modeling Factors Affecting Economic Growth in Iran: Markov Switching Garch Approach, Quarterly Journal of Fiscal and Economic Policy, 6 (24), 33-58. (In Persian)
  49. Narayan, P. K., & Narayan, S. (2004). Estimating Income and Price Elasticity's of Imports for Fiji in a Cointegration Framework, Economic Modeling, 22, 423-438.
  50. Perotti, R., (1999). Fiscal Policy When Things Are Going Badly. Quarterly Journal of Economics, 114, 1399–1436.
  51. Perotti, R. (2004). Estimating The Effects of Fiscal Policy in OECD Countries. University of Bocconi, Working Paper,
  52. Pragidis, I. C., Tsintzos, P., & Plakandaras, B. (2018). Asymmetric Effects of Government Spending Shocks During the Financial Cycle. Economic Modelling, 68, 372-387.
  53. Rafiq, S., & Zeufack, A. (2012). Fiscal Multipliers Over the Growth Cycle Evidence from Malaysia, Policy Research Working Paper, 5982.
  54. Rezaeipour, M., & Aghaei Akhondabi, M. (2011). Where Government Spending is on the Actual Consumption of the Private sector. Quarterly Journal of Economic Research and Policy, 19 (60), 160-139. (In Persian)
  55. Romer, R. (1992).What Ended the Great Depression? The Journal of Economic History, 52(4), 757-784.
  56. ShamsAldini, A., & Gorjian, P. (2010). Factors affecting the migration of villagers to cities, with emphasis on the migration network (Case: Rostam Do village). Human Settlement Planning Studies (Geographical Landscape), 5(11), 87-105. (In Persian)
  57. Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014). Modelling Asymmetric Co Integration and Dynamic Multipliers in a Nonlinear ARDL Framework, Festschrift in Honor of Peter Schmidt. Springer, New York, 281–314.
  58. Schorderet, Y. (2001). Revisiting Okuns Law: An Hysteric Perspective. Unpublished Manuscript, University of California San Diego.
  59. Sheehey, A. J. (1993). The Effect of Government Size on Economic Growth. Eastern Economic Journal ,19(3), 321-328.
  60. Schorderet, Y. (2003). Asymmetric Co Integration. University de Geneve Faculte des Sciences Economies at Socials. Revisiting Okun’s Law: An Hysteretic Perspective. Mimeo: University of California San Diego.
  61. Suri, Ali. (2019). Econometrics, Volume One, Eighth Edition, Tehran: Cultural geology Publishing. (In Persian)
  62. Sutherland, A. (1997). Fiscal Crises and Aggregate Demand: Can High Public Debt Reverse the Effects of Fiscal Policy. Journal of Public Economics, 65.
  63. Stowe, K. (1992), Good Piano Won't Play Bad Music: Administrative Reform and Good Governance, Public Administration, 70, 387-394.
  64. Tornell, A., & Lane, P. (1999), The Voracity Effect, American Economic Review, 89, 22-46.
  65. Transpaerency International. (2020). The Global coalition against corruptin. Transpaerency International Report.
  66. Vedder, R.K., & Gallaway, L.E. (1998). Government Size and Economic Growth. Joint Economic Committee G-01 Dirksen Building Washington DC, 20510.
  67. Vianna, A. C., & Mollick, A. V. (2018), Institutions: Key Variable for Economic Development in Latin America, Journal of Economics and Business, 96, 42-58.
  68. Zubairi, H., & Salahi Kojoor, S. (2019). The Effect of Judicial Independence on GDP (inter-country Study Using Panel Data Method). Quarterly Journal of Econometric Modeling, 3 (3), 63-82. (In Persian)
  69. Zamani Shabkhaneh, S., & Mehregan, N. (2014). Investigating the effect of urbanization on income distribution in Iran with emphasis on Kuznets theory. Quarterly Journal of Planning and Budgeting, 3 (18), 3-19. (In Persian).