The impact of educational expenditures of government on economic growth of Iran
Main Article Content
Keywords
Wagner, Keynes, total expenditures, educational expenditures, government expenditure, ARDL, ECM.
Abstract
Using the annual data of Iran’s economy from 1981-2012, this study examines Wagner’s law and the Keynesian hypothesis about the relationship between the real government expenditure and the real GDP. In this regard, this paper investigated the relationship between the total government expenditure, the GDP and the relationship between government educational expenditure and GDP using bivariate and multivariate models. The multivariate model is used to reduce the specified error issues that has not been considered in many studies. The co-integration was examined using the auto regressive distributive lag method (ARDL) of both long-term and short-term relationships. In making the estimations of the Wagner’s view, the variables: real GDP, capital stock and labor force stock respectively, had a positive, a negative, and a positive impact on total government expenditure and the long-term relationship is true in this regard. Additionally, in the estimation of Keynesian model, the educational expenditures, unlike real expenditures of government, had a long-term relationship. In addition, the variable, capital, in both models had a similar effect on the real GDP, and the labor force coefficient in the presence of the total expenditures and educational expenditures were negative and positive respectively.
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References
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Afxentiou, P. C., & Serletis, A., (1996). Government expenditure in the European Union: do they converge or follow Wagner’s Law?. International Economic Journal, 10, 33–47.
Akitoby, B., Clements, B., Gupta, S., & Inchauste, G., (2006). Public spending, voracity and Wagner’s law in developing countries. European Journal of Political Economy 22(4), 908–924.
Al-Yousif, Y. K. (2008). Education expenditure and economic growth: some empirical evidence from the GCC Countries, J Dev Areas 42(1), 69–80.
Annabi, Nabil, Harvey, Simon and Lan, Yu., (2011). Public expenditures on education, human capital and growth in Canada: An OLG model analysis. Journal of Policy Modeling, 33(6), 852–865.
Ansari, M. I., Gordon, D. V., & Akuamoah, C., (1997). Keynes versus Wagner: public expenditure and national income for three African countries. Applied Economics, 29(4), 543–550.
Babatunde, M. A., (2011). A bound testing analysis of Wagner’s law in Nigeria: 1970–2006. Applied Economics, 43(21), 2843-2850.
Barro, R., (1990). Government spending in a simple model of endogenous growth. Journal of Political Economy 98(5) 103–125.
Barro, R., (1991). Economic growth in a cross section of countries. The Quarterly Journal of Economics, 106 (2), 407–443.
Biswal, B., Dhawan, U., & Hooi-Yean, L., (1999). Testing Wagner versus Keynes using disaggregated public expenditure data for Canada. Applied Economics, 31(10), 1283–1291.
Blankenau, W., & Simpson, N. B., (2004). Public education expenditures and growth. Journal of Development Economics 73(2), 583–605.
Chang, T., (2002). An econometric test of Wagner’s law for six countries based on cointegration and error correction modelling techniques. Applied Economics, 34(9), 1157–1169.
Chow, Y-F., Cotsomitist, J. A., & Kwan, A. C. C., (2002), Multivariate cointegration and causality tests of Wagner’s hypothesis: evidence from the UK. Applied Economics, 34(13), 1671–1677.
Devlin, N., & Hansen, P., (2001). Health care spending and economic output: granger causality. Applied Economics Lett, 8(8), 561–564.
Dissou, Y., Didic, S. & Yakautsava, T., (2016). Government spending on education, human capital accumulation and growth. Economic Modelling 58, 9-21.
Dritsaki, C., & Dritsaki, M., (2010). Government Expenditure and National Income: Causality Tests for Twelve New Members of E.E. The Romanian Economic Journal, Year XIII, (38), 67- 89.
Durevall, D., & Henrekson, M., (2011). The futile quest for a grand explanation of long-run government expenditure. Journal of Public Economics, 95, 708 –722.
Gandhi, V. P., (1971), Wagner’s law of public expenditure: do recent cross section studies confirm it?. Public Financ, 26 (1), 44–56.
Goffman, I. J., (1968). On the empirical testing of Wagner’s law: a technical note. Public Financ 23, 359–364.
Govindaraju, V. G. R., Chandran, Rao, Ramesh, & Anwar, Sajid, (2011). Economic growth and government spending in Malaysia: a re-examination of Wagner and Keynesian views. Economic Change and Restructuring, 44, 203–219.
Grubb, W, N., & Michelson, S., (1974). States and schools: the political economy of public school finance. Lexington, MA: Lexington Books. Guthrie, J. W.
Gupta, SP., (1967). Public expenditure and economic growth: a time series analysis. Public Financ, 22, 423–466.
Gupta, Sanjeew. Verhoeven, Marijn. (2001). The efficiency of government expenditure Experiences from Africa. Journal of Policy Modeling, 23(4), 433– 467.
Halicioglu, F., (2003). Testing Wagner’s law for Turkey, 1960–200. Review of Middle East Economics and Finance, 1(2), 129–140.
Huang, C, J., (2006). Testing Wagner’s law using bounds test and a new granger non-causality test: evidence for Taiwan. Journal of American Academy of Business, 8(2), 86–90.
Inder., (1993). Estimating long-run relationships in economics: a comparison of different approaches. Journal of Econometrics 57, 53–68.
Jung, H.S. & Thorbecke, E. (2003). The impact of public education expenditure on human capital, growth, and poverty in Tanzania and Zambia: a general equilibrium approach. Journal of Policy Modeling, 25(8),701–72.
Jurges, H., Schneider, K., (2004). International differences in student achievement: an economic perspective. German Economic Review, 5(3), 357–380.
Kolluri, B, R., Panik, M, J., & Wahab, M., (2000). Government expenditure and economic growth: evidence from G7 countries. Applied Economics, 32, 1059–1068.
Levy, J. V. Clements, B. (1996). Public education expenditure and private investment in developing countries. Economic Letters, 53(3). 331-336.
Magazzino, C., (2012). Wagner versus Keynes: Public spending and national income in Italy. Journal of Policy Modeling 34, 890–905.
Narayan, P, K, Nielsen, I, & Smyth, R., (2008). Panel data, cointegration, causality and Wagner’s law: empirical evidence from Chinese provinces. China Econ Rev 19, 297–307.
Peacock, A, & Scott, A., (2000). The curious attraction of Wagner’s law. Public Choice, 102(1/2), 1–17.
Peacock, A, T., & Wiseman, J., (1961). The growth of public expenditure in the United Kingdom. Princeton University Press, Princeton.
Pesaran, MH., Shin, Y., (1999). An autoregressive distributed lag modelling approach to cointegration analysis. In: Strom S (ed) Econometrics and economic theory in the 20th century: the Ragnar Frisch Centennial Symposium, Cambridge University Press, Cambridge.
Prasetyo, A. D. & Zuhdi, U., (2013). The Government Expenditure Efficiency towards the human development. Procedia Economics and Finance 5, 615-622.
Qi, J. (2016). Government Education Expenditure, Third-party Spillover Effect and Economic Growth in China. Journal of Sustainable Development, 9(2), 145-152.
Ram, R. (1987). Wagner's hypothesis in time-series and cross-section perspectives: Evidence from" real" data for 115 countries. The review of Economics and Statistics, 69(2),194-204.
Ram, R., (1986). Causality between income and government expenditure: a broad international perspective. Public Finance 41, 393–414.
Ranjan, R., & chintu, A. K., (2013). An Application of Wagner’s Law in the Indian Economy: 1970-71 to 2010-11. Knowledge Horizons – Economics, 5(4), 138–144.
Rehme, G., (2007). Education, economic growth and measured income inequality. Economica 74(295), 493–514.
Romer, P., (1990). Endogenous technological change. Journal of Political Economy, 98(5), 71–102.
Samudram, M., Nair, M., & Vaithilingam, S., (2009). Keynes and Wagner on government expenditures and economic development: the case of a developing economy. Empir Econ, 36 (3), 697–712.
Thornton, J., (1999). Cointegration, causality and Wagner’s law in 19th century Europe. Applied Economics Lett, 6 (7), 413–416.
Wahab, M., (2004). Economic growth and government expenditure: evidence from a new test specification. Applied Economics, 36, 2125–2135.
Wolff, E. N., (2015). Educational expenditures and student performance among OECD countries. Structural change and Economic Dynamics 33, 37-57.
Afxentiou, P. C., & Serletis, A., (1996). Government expenditure in the European Union: do they converge or follow Wagner’s Law?. International Economic Journal, 10, 33–47.
Akitoby, B., Clements, B., Gupta, S., & Inchauste, G., (2006). Public spending, voracity and Wagner’s law in developing countries. European Journal of Political Economy 22(4), 908–924.
Al-Yousif, Y. K. (2008). Education expenditure and economic growth: some empirical evidence from the GCC Countries, J Dev Areas 42(1), 69–80.
Annabi, Nabil, Harvey, Simon and Lan, Yu., (2011). Public expenditures on education, human capital and growth in Canada: An OLG model analysis. Journal of Policy Modeling, 33(6), 852–865.
Ansari, M. I., Gordon, D. V., & Akuamoah, C., (1997). Keynes versus Wagner: public expenditure and national income for three African countries. Applied Economics, 29(4), 543–550.
Babatunde, M. A., (2011). A bound testing analysis of Wagner’s law in Nigeria: 1970–2006. Applied Economics, 43(21), 2843-2850.
Barro, R., (1990). Government spending in a simple model of endogenous growth. Journal of Political Economy 98(5) 103–125.
Barro, R., (1991). Economic growth in a cross section of countries. The Quarterly Journal of Economics, 106 (2), 407–443.
Biswal, B., Dhawan, U., & Hooi-Yean, L., (1999). Testing Wagner versus Keynes using disaggregated public expenditure data for Canada. Applied Economics, 31(10), 1283–1291.
Blankenau, W., & Simpson, N. B., (2004). Public education expenditures and growth. Journal of Development Economics 73(2), 583–605.
Chang, T., (2002). An econometric test of Wagner’s law for six countries based on cointegration and error correction modelling techniques. Applied Economics, 34(9), 1157–1169.
Chow, Y-F., Cotsomitist, J. A., & Kwan, A. C. C., (2002), Multivariate cointegration and causality tests of Wagner’s hypothesis: evidence from the UK. Applied Economics, 34(13), 1671–1677.
Devlin, N., & Hansen, P., (2001). Health care spending and economic output: granger causality. Applied Economics Lett, 8(8), 561–564.
Dissou, Y., Didic, S. & Yakautsava, T., (2016). Government spending on education, human capital accumulation and growth. Economic Modelling 58, 9-21.
Dritsaki, C., & Dritsaki, M., (2010). Government Expenditure and National Income: Causality Tests for Twelve New Members of E.E. The Romanian Economic Journal, Year XIII, (38), 67- 89.
Durevall, D., & Henrekson, M., (2011). The futile quest for a grand explanation of long-run government expenditure. Journal of Public Economics, 95, 708 –722.
Gandhi, V. P., (1971), Wagner’s law of public expenditure: do recent cross section studies confirm it?. Public Financ, 26 (1), 44–56.
Goffman, I. J., (1968). On the empirical testing of Wagner’s law: a technical note. Public Financ 23, 359–364.
Govindaraju, V. G. R., Chandran, Rao, Ramesh, & Anwar, Sajid, (2011). Economic growth and government spending in Malaysia: a re-examination of Wagner and Keynesian views. Economic Change and Restructuring, 44, 203–219.
Grubb, W, N., & Michelson, S., (1974). States and schools: the political economy of public school finance. Lexington, MA: Lexington Books. Guthrie, J. W.
Gupta, SP., (1967). Public expenditure and economic growth: a time series analysis. Public Financ, 22, 423–466.
Gupta, Sanjeew. Verhoeven, Marijn. (2001). The efficiency of government expenditure Experiences from Africa. Journal of Policy Modeling, 23(4), 433– 467.
Halicioglu, F., (2003). Testing Wagner’s law for Turkey, 1960–200. Review of Middle East Economics and Finance, 1(2), 129–140.
Huang, C, J., (2006). Testing Wagner’s law using bounds test and a new granger non-causality test: evidence for Taiwan. Journal of American Academy of Business, 8(2), 86–90.
Inder., (1993). Estimating long-run relationships in economics: a comparison of different approaches. Journal of Econometrics 57, 53–68.
Jung, H.S. & Thorbecke, E. (2003). The impact of public education expenditure on human capital, growth, and poverty in Tanzania and Zambia: a general equilibrium approach. Journal of Policy Modeling, 25(8),701–72.
Jurges, H., Schneider, K., (2004). International differences in student achievement: an economic perspective. German Economic Review, 5(3), 357–380.
Kolluri, B, R., Panik, M, J., & Wahab, M., (2000). Government expenditure and economic growth: evidence from G7 countries. Applied Economics, 32, 1059–1068.
Levy, J. V. Clements, B. (1996). Public education expenditure and private investment in developing countries. Economic Letters, 53(3). 331-336.
Magazzino, C., (2012). Wagner versus Keynes: Public spending and national income in Italy. Journal of Policy Modeling 34, 890–905.
Narayan, P, K, Nielsen, I, & Smyth, R., (2008). Panel data, cointegration, causality and Wagner’s law: empirical evidence from Chinese provinces. China Econ Rev 19, 297–307.
Peacock, A, & Scott, A., (2000). The curious attraction of Wagner’s law. Public Choice, 102(1/2), 1–17.
Peacock, A, T., & Wiseman, J., (1961). The growth of public expenditure in the United Kingdom. Princeton University Press, Princeton.
Pesaran, MH., Shin, Y., (1999). An autoregressive distributed lag modelling approach to cointegration analysis. In: Strom S (ed) Econometrics and economic theory in the 20th century: the Ragnar Frisch Centennial Symposium, Cambridge University Press, Cambridge.
Prasetyo, A. D. & Zuhdi, U., (2013). The Government Expenditure Efficiency towards the human development. Procedia Economics and Finance 5, 615-622.
Qi, J. (2016). Government Education Expenditure, Third-party Spillover Effect and Economic Growth in China. Journal of Sustainable Development, 9(2), 145-152.
Ram, R. (1987). Wagner's hypothesis in time-series and cross-section perspectives: Evidence from" real" data for 115 countries. The review of Economics and Statistics, 69(2),194-204.
Ram, R., (1986). Causality between income and government expenditure: a broad international perspective. Public Finance 41, 393–414.
Ranjan, R., & chintu, A. K., (2013). An Application of Wagner’s Law in the Indian Economy: 1970-71 to 2010-11. Knowledge Horizons – Economics, 5(4), 138–144.
Rehme, G., (2007). Education, economic growth and measured income inequality. Economica 74(295), 493–514.
Romer, P., (1990). Endogenous technological change. Journal of Political Economy, 98(5), 71–102.
Samudram, M., Nair, M., & Vaithilingam, S., (2009). Keynes and Wagner on government expenditures and economic development: the case of a developing economy. Empir Econ, 36 (3), 697–712.
Thornton, J., (1999). Cointegration, causality and Wagner’s law in 19th century Europe. Applied Economics Lett, 6 (7), 413–416.
Wahab, M., (2004). Economic growth and government expenditure: evidence from a new test specification. Applied Economics, 36, 2125–2135.
Wolff, E. N., (2015). Educational expenditures and student performance among OECD countries. Structural change and Economic Dynamics 33, 37-57.
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Published
Feb 28, 2017
Article Details
How to Cite
Jeyhoon Tabar, F., Najafi, Z., & Sistani Badooei, Y. (2017). The impact of educational expenditures of government on economic growth of Iran. AD-Minister, (30), 217–235. https://doi.org/10.17230/ad-minister.30.11
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Research Articles
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Author Biographies
Fozieh Jeyhoon Tabar, Shahid Bahonar University of Kerman
Lecturer in Baft Higher Education Center, Shahid Bahonar University of Kerman. She has several publications in national and international journals and participated in several conferences. Her main areas of interest are: public finance, public choice, fiscal illusion, institutions, economic development and private sector development.Zahra Najafi, University of Kermanshah
Lecturer in Payam-e-Noor University of Kermanshah. She has several publications in national and in- ternational journals and participated in several conferences. Her main areas of interest are: international trade, public finance, and institutions.
Yaser Sistani Badooei, Shahid Bahonar University of Kerman
Lecturer and Researcher at the Department of Economics, Baft Higher Education Center, Shahid Bahonar University of Kerman. He has several publications in national and international journals and participated in several conferences. yaser is author some of academic articles in economics in Persian and English. His main areas of interest are: financial economy, econometrics, economic development, urban economics and energy economy.Authors who publish with this journal agree to the following terms:
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