Government Expenditure and Inclusive Growth: Advanced vs. Developing Economies

This study analyzes the effects of government expenditure composition on economic growth and income inequality in 91 countries from 1990 to 2023, using a Panel Vector Autoregression (PVAR) model. The findings reveal notable differences between advanced and developing economies. In advanced economies, only infrastructure investment consistently promotes growth, while education spending reduces inequality and healthcare expenditures may increase disparities over time. In developing economies, infrastructure investment has a stronger and more persistent impact on growth, but education and healthcare spending exhibit limited redistributive effects. Social transfers show mixed results, with inefficiencies sometimes leading to worsening income inequality. These results highlight the importance of context-specific fiscal policies, ensuring that spending priorities align with national development goals to achieve both economic expansion and equitable distribution.