The study has examined the impact of decentralized public spending on the economic growth of Pakistan from 1972 to 2016. For examining the stationarity of variables, Augmented Dickey- Fuller (ADF) unit root test is used. Autoregressive Distributed Lag Approach (ARDL) is used for cointegration among the variables of the model. The estimated results of the study show that decentralized education and health expenditures have positive and significant impact on economic growth of Pakistan. Furthermore, the study shows that decentralization of education and health expenditures is growth enhancing. On the basis of results of interaction terms of health expenditures decentralization with political freedom, and education expenditures decentralization with political freedom, economic growth can be enhanced if people get more political freedom. Our results suggest that health and education expenditures carried out by provincial governments can be beneficial to economic growth if people have more political rights and provincial governments have more autonomy.
Keywords: education and health expenditures, decentralization, political freedom, economic growth.