Public expenditure, economic growth and poverty alleviation
Abstract
Purpose
The purpose of this paper is to examine the impact of public expenditure on economic growth and poverty alleviation in developing countries like India. If poverty and inequality are high, the government may resort to distributive policies at the cost of long-term growth. The distributive policies and poverty alleviation measures fail to achieve success due to lack of good governance, lack of proper targeting and problems in the implementation of such schemes. On the other hand, if the nature of public expenditure is such that it enhances per capita income, it will help reduce poverty.
Design/methodology/approach
After analytical digression and construction of hypotheses panel regression has been done using state-level data in the Indian context to empirically verify the above propositions. Both Fixed effects and Random effects models have been used for this purpose.
Findings
The results show that in states where ratio of public expenditure on the development of infrastructure such as road, irrigation, power, transport and communication is higher, per capita income is also higher and incidence of poverty is lower indicating that economic growth is important for poverty alleviation and development of infrastructure is necessary for growth.
Originality/value
This study demonstrates how public policy and public finance can be used as instruments for removal of poverty.
Keywords
Acknowledgements
The earlier draft of this paper was presented at 49th Annual Conference of The Indian Econometric Society at Patna University, India. The authors are indebted to the participants of the Conference for their valuable comments on this paper. The authors are also indebted to the anonymous referees for valuable comments on this paper. The authors are benefitted from the help of R.N. Bhattacharya, Sugata Marjit, Debasis Mondal and Pinaki Das.
Citation
Sasmal, R. and Sasmal, J. (2016), "Public expenditure, economic growth and poverty alleviation", International Journal of Social Economics, Vol. 43 No. 6, pp. 604-618. https://doi.org/10.1108/IJSE-08-2014-0161
Publisher
:Emerald Group Publishing Limited
Copyright © 2016, Emerald Group Publishing Limited