Budgetary choice and its path to economic growth in the US states: does total expenditure stabilisation work as a mediating factor? Online publication date: Fri, 21-Aug-2020
by Sungchan Kim; Soyoung Park
International Journal of Economics and Business Research (IJEBR), Vol. 20, No. 2, 2020
Abstract: As the three roles of government are closely related to economic growth (Moreno-Dodson, 2008; Musgrave, 1959), state governments also play a similar role in pursuing economic growth by adopting two budgetary choices. The first choice, the allocation role, involves investing in capital expenditures, while the second choice, the stabilisation role, involves saving money for the future. However, compared to the central government, little is known about the effectiveness of budgetary choice at the subnational level. Thus, this paper investigates whether spending on capital expenditures and saving for the future are effective for state governments in the USA, and how another role of government affects economic growth. The empirical results demonstrate that making capital expenditures and saving for the future are positively related to economic growth in state government. However, the volatility of total expenditures does not have a significant relationship with economic growth.
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