Abasyn Journal of Social Sciences – Vol (11), Issue (2), 2018

The Impact of Decentralized Public Spending on Economic Growth: A Time Series Analysis for Pakistan

1Muhammad Shahid, 2Abdul Farooq and Ahmad Nawaz

1National College of Business Administration and Economics, Lahore, Pakistan
2Department of Management Sciences, COMSATS Institute of Information Technology, Lahore ,Pakistan

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.




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