CHAPTER II

RESEARCH LAYOUT

In this chapter, researcher discusses the statement of problem and need of the study, on the

basis of review of literature discussed in chapter I. This chapter devoted to the research design

and methodology followed to achieve the objectives of this study. Apart from it, the variables of

the study and tools used for data analysis have been discussed in detail in this chapter and come

to an end with the limitations and significance of study.

2.1 Introduction

This chapter will present the methodology used to complete this study. It will include how the

research was carried out in terms of research design, data collection methods, and methods of

data analysis.

2.2 Research Design

Research design is the blueprint for fulfilling objectives and answering questions (Donald R.

Cooper, 2008). A clearly defined of methods used in collecting, understanding, and analysing

the data will help to provide a framework for the study, Objectives of the study should be

included as well to obtain the appropriate information when solving the problem(Zikmund,

Babin, Carr, & Griffin, 2010). Thus it is important to select an appropriate research design.

Research can be categorized into three different types which are exploratory research,

descriptive research and causal research. Exploratory research leds to simplify and express the

nature of a problem but it does not deliver conclusive evidence and likely to carry out a further

research (“GOVERNMENT EXPENDITURE COMPONENTS THAT AFFECTS,” n.d.).

Descriptive research is performed to better understand the characteristics of a population or

phenomenon when a problem is known. Causal research helps to identify relationship among

the variables and also helps to express the prediction of the future. This is a quantitative

research. Causal research is selected as the type of research based upon the purpose of this

research which is to find out the relationship between the independent variables and dependent

variable.
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2.3 Need of the Study

With the view of Research gap(1.3.1),it has been found that Many studies have aimed at

estimating the effects of public expenditure on economic growth. Empirical studies have yielded

conflicting results: some support the hypothesis that a rise in the share of public spending is

associated with a decline in economic growth (Landau (1986) and Scully (1989)); others have

found that public spending is associated positively with economic growth (Ram (1986)); and

still other studies have found no significant relationship (Kormendi and Meguire (1985) and

Diamond (1989)). Public expenditures were observed in one study to have no impact on growth

in developed countries, but a positive impact in developing countries (Sattar (1993)). In contrast

to the generally positive correlations between education and growth, a number of studies have

reported only a weak correlation between labor productivity--a factor strongly associated with

economic growth--and health indicators (Gwatkin (1983)), although there are exceptions (for

example, World Bank (1993a)).Some studies have aimed at assessing the effects of military

expenditures on economic growth. Military expenditures can create jobs, and military research

and development programs can promote technological progress (Benoit (1973)). In modern

economic activities public expenditure has to play an important role. It helps to accelerate

economic growth and ensure economic stability. Thus public expenditure has to create and

maintain conditions conducive to economic development.

There are various studies which worked to find out the relationship between public expenditures

and economic growth. There are various studies((Alexiou, 2009), (MIYAKOSHI,

TSUKUDA, KONO, & KOYANAGI, 2010), (Monte et al., 1997),(Colombier, 2011),(Loizides

& Vamvoukas, 2004) which worked on developed countries like OECD, Switzerland ,Greece,

U.K. Italy have positive and unidirectional relationship from public expenditure to economic

growth and there are some studies ((Shivaranjani, 2010)),(Devarajan, Swaroop, & Zou,

1996),(De & Endow, 2008)) which find developing countries like India, Bolivia , Nepal has

positive relation for long run growth(unidirectional) while South Korea has positive

bidirectional impact.
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Some studies((Ba˘ Gdigen, Cetinta, Bağdigen, & Çetintaş, 2003)), (Mudaki & Masaviru,

2012))) find developing countries like Nigeria , Malaysia, Turkey ,Kenya has no relation

between public expenditure and economic growth .There are various studies ((Jha, Biswal, &

Biswal, 2001)) (Mukherjee & Chakraborty, 2010), (Gomanee, Girma, & Morrissey, 2005),

which finds positive and significant relationship between public expenditure (different areas)

and human development index. In most of the studies granger causality, co-integration analysis,

panel data study, VECM techniques or GMM method is used to find relationship. Developing

countries has different relationship status in empirical literature.

This study is an attempt to find the impact of public expenditure on economic growth of

selected developing countries during specified period (from 1990-01 to 2013-14).Under this

study, model is developed to understand the relationship between public expenditure and

economic growth for the Selected developing countries.

2.4 Objectives of the Study

1. To study the components / Items of Public Expenditure of selected developing countries

under specified period.

2. To analyze the relationship between Public Expenditure (components wise) and Economic

Growth (determinant wise) of all selected countries under specified period.

3. Predicting economic growth on the basis of public expenditure through appropriate model.

2.5 Research Hypothesis

Ideally, based on the concept of big and small government and in conjunction with the

Keynesian views and Wagner’s Law, this study defines the general hypothesis as that

government expenditure has a relationship towards economic growth. To gives the scientific

base to the study, the following hypotheses will be tested in the study:

Ho1: Selected Public Expenditure and GDP per capita are independent of each other.
(Ho1(a)) Health Expenditure and GDP per capita are independent of each other.
(Ho1(b)) General Government Final Consumption Expenditure and GDP per capita are
independent of each other.
(Ho1(c)) Education Expenditure and GDP per capita are independent of each other.
(Ho1(d)) Transport Expenditure and GDP per capita are independent of each other.
(Ho1(e)) Telecom Expenditure and GDP per capita are independent of each other.
34

(Ho1(f)) Adjusted Saving: Education Expenditure and GDP per capita are independent
of each other.
(Ho1(g)) Military Expenditure and GDP per capita are independent of each other.
(Ho1(h)) Energy Expenditure and GDP per capita are independent of each other.

Ho2: Selected Public Expenditure and HDI are independent of each other.
(Ho2(a)) Health Expenditure and HDI are independent of each other.
(Ho2(b)) General Government Final Consumption Expenditure and HDI are
independent of each other.
(Ho2(c)) Education Expenditure and HDI are independent of each other.
(Ho2(d)) Transport Expenditure and HDI are independent of each other.
(Ho2(e)) Telecom Expenditure and HDI are independent of each other.
(Ho2(f)) Adjusted Saving: Education Expenditure and HDI are independent of each
other.
(Ho2(g)) Military Expenditure and HDI are independent of each other.
(Ho2(h)) Energy Expenditure and HDI is independent of each other.
Ho3: Selected Public Expenditure and Real Income per capita are independent of each
other.
(Ho3(a)) Health Expenditure and Real Income per capita are independent of each other.
(Ho3(b)) General Government Final Consumption Expenditure and Real Income per
capita are independent of each other.
(Ho3(c)) Education Expenditure and Real Income per capita are independent of each
other.
(Ho3(d)) Transport Expenditure and Real Income per capita are independent of each
other.
(Ho3(e)) Telecom Expenditure and Real Income per capita are independent of each other.
(Ho3(f)) Adjusted Saving: Education Expenditure and Real Income per capita are
independent of each other.
(Ho3(g)) Military Expenditure and Real Income per capita are independent of each other.
(Ho3(h)) Energy Expenditure and Real Income per capita are independent of each other.

2.6 Research Design & Methodology

Research design & methodology is the back bone of any research study. The researcher

proposes the following research procedure for this study:

2.6.1 Data Collection

Researcher can gather the required data through primary or secondary sources or by both

sources. It can be collected through different ways such as surveys, experiments, observation,

secondary data, journals, and interviews. This study utilizes data from secondary resources.

Panner selvam (2006) states that secondary data is data collected from sources that have already

been created for the purpose of first time use and future uses. The data are structured annually

from a period of 1990 to 2013 (24 years).Data has been taken in Current US($) terms.
 35

Secondary Data has been collected through the publications of ministry of finance, World Bank

reports, IMF, UNDP, UNESCO website, journals, magazines books and newspapers.

2.6.1.1 Data processing

Before proceed to analyze the data collected, this step is needed to process the data. Data

processing consists of determination of variables and transformation of the variable.

2.6.1.2 Transformation of Variable

Instead of using the original unit which is in Millions of current US ($), all the variables in this

research will be transform in to natural logarithms form. This is to create a clearer picture and

better understanding and comparison of the variables.

2.6.2 Scope of the Study

2.6.2.1 Sample Size
The research includes six selected emerging developing countries named as
Brazil China India
Russian Federation South Africa Indonesia

2.6.2.2 Duration of the Study

For the purpose of analyzing the data a period of last 24 observations (i.e., 1990-91 to 2013-14)

has been taken into consideration. Table: 2.1-Variables of the study

Selected Items of Public Expenditure(Description and sources given in Appendix)

Variables Measurement Unit for study
Health expenditure(HE) Lnhea
Energy expenditure(ENE) Lnener
Transport expenditure(TRE) Lntrans
General government final consumption expenditure(GE) Lnfinal
Telecoms expenditure(TE) Lntele
Military expenditure(ME) Lnmili
Education Expenditure(EE) Lnedu
Adjusted savings: education expenditure(AEE) Lnad
Selected Determinants of Economic Growth (Description and sources given in
Appendix)
Variables Measurement Unit for study
GDP per capita (GDP) Lngdp
Human Development Index (HDI) Lnhdi
National Income per capita or Real per capita income (NI) Lnni
Note: Three items of public expenditure are dropped due to non-availability of data namely
Research and Development expenditure, Water and sanitation expenditure and other Expenses.
36

2.7 Tools and Techniques of Study

There are a number of tests that are available to conduct analysis. Some of the relationship

analysis tests are linear regression, correlation test, normality test, co-integration test, and unit

root test which are selected according to the data of study. Data analysis software used to

analyze the data collected in this study are E Views 9 and STATA 12. For the purpose of

analyzing the data following statistical and econometric tools and techniques will be used:

• Descriptive Statistic

• CAGR

• Panel Unit Root Test

• Panel Co-integration Test

• Bias Corrected Least Square Dummy Variable Panel Model.

2.7.1 Descriptive Statistics

Descriptive statistic helps in transforming raw data into an interpretable form and characterizing

various aspects of selected variables to provide descriptive information.

2.7.2 Compound annual growth rate (CAGR)

Compound annual growth rate (CAGR) is a rate that measures an investment upsurges or

declines year over year. It can also be understood as an annual average rate of return for an

investment during a period. Mostly investments’ yearly returns fluctuate from year to year, the

CAGR calculation averages the good years’ and bad years’ results into one return percentage

that investors can use to take future monetary decisions.

It's vital to recollect that the compound annual growth rate isn’t the actual yearly rate of return.

It’s an average of all the yearly returns the venture has created. It evens all the years’ rates out to

make it simpler to compare the returns to other investment opportunities. or instance, an

organization may support a capital venture that loses cash for five straight years and makes a

colossal benefit on the 6th year. This CAGR would level out initial five years’ worth of negative

comes back with the 6th year's positive return. The CAGR formula is:

CAGR = (Investment's ending value (EV) / Investment's beginning value (BV))1 / n - 1

Where: n = Number of periods (months, years, etc.)

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2.7.3 Panel Unit Root Test

Many economic and financial time series exhibit trending behavior or non-stationarity in the

mean. Leading examples are asset prices, exchange rates and the levels of macroeconomic

aggregates like real GDP. A major econometric task is deciding the most applicable type of the

trend in the data. For example, in ARMA modeling the data must be converted to stationary

form before analysis. If the data are trending, then some method of trend removal is requisite.

Two common trend removal or de-trending procedures are first differencing and time-trend

regression. First differencing is appropriate for I (1) time series and time-trend regression is

appropriate for trend stationary I (0) time series. Unit root tests can be used to decide if trending

data should be first differenced or regressed on deterministic functions of time to extract the

data stationary. Moreover, economic and finance theory often suggests the existence of long-run

equilibrium relationships among non-stationary time series variables. If these variables possess I

(1) qualities, then co-integration methods can be used to model long-run relations among them.

Panel unit root tests are similar, but not identical, to unit root tests carried out on a single series.

Here, researcher briefly describe the three panel unit root tests currently supported in EViews

by categorizing unit root tests on the basis of restrictions on the autoregressive process across

cross-sections. Consider a following AR (1) process for panel data:

𝑦𝑖𝑡 = 𝜌𝑖 𝑦𝑖𝑡−1 + 𝑋𝑖𝑡 𝛿𝑖 + 𝜖𝑖𝑡

where i=1,2,…..n cross-section units, that are observed over a periods t= 1,2,…..T .

The Xit represent the exogenous variables in the model, including any fixed effects or individual

trends, 𝜌𝑖 are the autoregressive coefficients, and the errors 𝜖𝑖𝑡 are assumed to be mutually

independent idiosyncratic disturbance e. If𝜌𝑖 < 1, 𝑦𝑖 is said to be weakly stationary. On the

other hand, if𝜌𝑖 = 1, and then 𝑦𝑖 contains a unit root.

For purposes of testing, there are two natural assumptions that we can make about the𝜌𝑖 . First,

one can assume that the persistence parameters are common across cross-sections so that 𝜌𝑖 = 𝜌

for all i. The Breitung, Levin, Lin, and Chu (LLC) and Hadri tests employ this assumption. On

the other hand, one can allow 𝜌𝑖 changing freely across cross-sections. The Im, Pesaran, and

Shin (IPS), and Fisher-ADF and Fisher-PP tests are of this form.
38

The LLC test is restrictive in a way because requires ρ to be homogeneous across i. As

(Maddala & Wu, 1999)points out, the null may be fine for testing convergence in growth among

countries, but the alternative restricts every country to converge at the same rate. Im et al.(2003)

(IPS) allow for a heterogeneous coefficient of , y it − 1 and propose an alternative testing

procedure based on averaging individual unit root test statistics

The Im, Pesaran, and Shin, and the Fisher-ADF and PP tests all allow for individual unit root

processes so that 𝜌𝑖 may vary across cross-sections. The tests are all characterized by the

combining of individual unit root tests to derive a panel-specific result.

The IPS test statistic prerequisites the specification of the number of lags and deterministic

component for each cross-section. It can include individual constants, or individual constant and

trend terms. IPS propose an average of the ADF tests when u it is serially correlated

with different serial correlation properties across cross-sectional units.

Second approach of panel unit root tests uses Fisher’s (1932) results to involve tests that

combine the p-values from individual unit root tests is Fisher ADF and Fisher PP unit root test.

This idea has been suggested by Maddala and Wu, and by Choi.E Views reports both the

asymptotic 𝜒 2 and standard normal statistics using ADF and Phillips-Perron individual unit root

tests. The null and alternative hypotheses are the same as for the as IPS.

Summary of Available Panel Unit Root Tests

The table 2.2 summarizes the basic characteristics of panel unit root tests available in E-Views:

Table: 2.2 Summary of -Panel Unit were test

Unit root Test Null Alternative Possible Autocorrelation
hypothesis hypothesis Deterministic Correction
Component Method
Levin, Lin and Unit root No Unit Root None, F, T Lags
Chu
Breitung Unit root No Unit Root None, F, T Lags
IPS Unit Root cross-sections F, T Lags
without UR
Fisher-ADF Unit Root cross-sections None, F, T Lags
without UR
Fisher-PP Unit Root cross-sections None, F, T Kernel
without UR
Hadri No Unit Unit Root F, T Kernel
Root
 39

2.7.4 Panel Co-integration Test

There are three types of panel co-integration test. One of them was introduced by (Pedroni,

1999) and a second one by (Kao, 1999) which is(Engle & Granger, 1987)Two Step Residual

based LM test, and a third one by Fisher which is a combined Johansen co-integration test. Only

(Kao, 1999)panel co-integration test is in accordance to this study because (Pedroni, 1999))

does not support where the number of cross section is less than the number of independent

variables. Johansen Fisher Panel Co-integration Test is not applicable on unbalanced panel data.

(Kao, 1999) introduced parametric residual-based panel tests for the null hypothesis of no co-

integration. The Kao test possesses same approach as followed by Pedroni co-integration tests,

but kao test determines cross-section specific intercepts and also homogeneous coefficients on

the first-stage regressors. (Kao, 1999) uses both DF and ADF to test for co-integration in panel

and this test is similar to the standard approach adopted in the Engle Granger-step procedures.

This test starts with the panel regression model as set out in equations as:

𝑌𝑖𝑡 = 𝑋𝑖𝑡 𝛽𝑖𝑡 + Ζ𝑖𝑡 𝛾0 + 𝑒𝑖𝑡 …………………………………… (2.1)

Where Y and X are presumed to be non-stationary and :( see equation 2.2)

𝑒̂𝑖𝑡 = 𝜌𝑒̂𝑖𝑡−1 + 𝜐𝑖𝑡 …………………… (2.2)

Where 𝑒̂𝑖𝑡 = 𝑦𝑖𝑡 − 𝑋𝑖𝑡 𝛽̂𝑖𝑡 − Ζ𝑖𝑡 𝛾̂ are the residuals from estimating equation 2.1 and 2.2. 𝑒𝑖𝑡 is

the element of the error which varies over group and time. Ζ𝑖𝑡 is observed time varying

confounding variable. To test the null hypothesis of no co-integration amounts to test H0: ρ= 1

in equation 2 against the alternative that Y and X are co-integrated (i, e., H1: ρ< 1).

2.7.5 Bias Corrected least square dummy variable Regression Model

Panel data (also known as longitudinal or cross sectional time-series data) is a dataset in which

the behaviors of entities are observed across time. These entities could be states, companies,

individuals, countries, etc.

Panel data let’s to control for variables which are cannot be observe or measure like cultural

factors or difference in business practices across companies; or variables that change over time

but not across entities (i.e. national policies, federal regulations, international agreements, etc.).
40

It helps in accounting for individual heterogeneity among data or can include variables at

different levels of analysis (i.e. students, schools, districts, states) in short suitable for multilevel

or hierarchical modeling. Some drawbacks for panel data are data collection issues (i.e.

sampling design, coverage), non-response in the case of micro panels or cross-country

dependency in the case of macro panels (i.e. correlation between countries).

A number of other consistent Instrumental Variable (IV) and Generalized Method of

Moments (GMM) estimators have been proposed in econometric literature as an alternative to

LSDV in the modeling of dynamic panel data. The bias arises from using static fixed effect

analysis in a small dataset. This is because it is well established in econometric literature

that an individual Specific fixed effect model engenders biased estimates in the absence of a

large and comprehensive datasets as a static fixed effect model is typically designed for dataset

with large ‘N’ and small ‘T’ (Cameron & KTrivedi, 2009). Thus, there is a need to correct for

such bias in the estimates when the sample size is small. It is also likely that individual country

specific and relatively time-invariant characteristics that are unobservable and non-

measurable such as culture, legal origin, geographical location and history and are fixed over

time are likely to be correlated with the various economic reforms and thereby

contradicting the use of random effects. Likewise, the limited number of cross-sections ‘N’

used in earlier studies implies that the data represents a finite sample and not a

random sample. Moreover, dynamic models can capture the effects of economic reforms on

outcomes which are not instantaneous but rather lagged.

Methodologies assumption: Each of the methodologies is designed to cope with specific dataset

features, such as “unobserved heterogeneity”, “Dynamic Panel Data”, etc. The columns in this

2.3 table indicate whether each methodology is designed to produce appropriate estimates under

the indicated condition.

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Table 2.3 Methodologies assumption of Models

Unobserved Dynamic Second Unbalanced Endogenous

Heterogeneity Panel Order Panel Data Variables
Data Serial
Correlation
OLS No No Yes Yes No
Fixed Effects Yes No Yes Yes No
Arellano Bond Yes Yes No Yes Yes
Blundell Bond Yes Yes No Yes Yes
Longest Diff Yes Yes Yes Assumed But Assumed But
Untested Untested
Period Diff Yes Yes Yes Assumed But Assumed But
Untested Untested
LSDVC Yes Yes Yes Yes No
Source:(Flannery & Watson Hankins, 2013)

As such, panel data econometric methods consists fixed effects (FE) and random effects (RE)

estimators can account for unobserved heterogeneity as established in econometric literature.

The FE and RE estimators differ in their assumptions about the unobserved heterogeneity and

a Hausman test is appropriate when applying RE and FE (Hausman and White, 2008).

We use the FE estimator to account for unobserved heterogeneity given that the countries

included in our sample are not identical to each other. This also fundamentally violates

the assumption of RE model. Further, the data used in this study does not represent a random

sample as ‘N’ is limited but represents a finite sample allowing the use of FE estimator.

A static FE model can be specified as

𝑦𝑖𝑡 = 𝛽0 + 𝑋𝑖𝑡 𝛽 + 𝑢𝑖𝑡

Which can be estimated using commands ‘xtreg’ or ‘xtregar’ for AR (1) estimates in STATA.

The behavior of the dependent variable can depend upon the past values of itself along with a

set of independent and control variables ((Bruno, 2005)).

Thus a dynamic specification of the panel model can be expressed as

𝑦𝑖𝑡 = 𝛽0 + 𝜌𝑖 𝑦𝑖𝑡−1 + 𝑋𝑖𝑡 𝛽 + 𝛼𝑖 + 𝑢𝑖𝑡

where ‘ρ’ is the coefficient of the lagged value of the dependent variable while ′𝑋𝑖𝑡 𝛽′

represents the matrix of explanatory variables and coefficients. In addition, it is well

established in econometric literature that a dynamic LSDV model with a lagged

dependent variable generates biased estimates when ‘T’ is small as is the case here
42

(Roodman, 2006).The estimates which are obtained through dynamic LSDV model are not

meaningful unless they are corrected for biasness in small samples (Kiviet, 1995) devised

a bias- corrected LSDV estimator valid only for balanced panels which is understood to

have the lowest Root Mean Square Error (RMSE) for panels of all sizes (Bun & Kiviet, 2003).

Based on these previous works, a version of bias-corrected LSDV estimate (LSDVC) has been

developed by Bruno (2005) which can be applied under two fundamental assumptions: a)

it has a strictly exogenous selection rule and b) the error term ‘it’ is classified as ‘an

unobserved white noise disturbance’. The approximation terms are of no direct use for

estimation as they are all evaluated at the unobserved true parameter values. Hence, the true

parameter values are replaced by estimates from some consistent estimator to make them

work ((Bruno, 2005)).

𝐿𝑆𝐷𝑉𝐶𝑖 = 𝐿𝑆𝐷𝑉 − 𝛽𝑖_ℎ𝑎𝑡

Where i=1 in STATA by default indicates the accuracy of the bias approximation. The

consistent estimator to be chosen to initialize the bias corrections could vary, for

example, between the Anderson-Hsiao (AH) and the Arellano-Bond (AB) estimators

((Bruno, 2005)). The AH estimator by transforming the data into first differences

precludes the fixed effects and uses the second lags of the dependent variable (either

differenced or in levels) as an instrument for the one-time differenced lagged dependent

variable ((Anderson & Hsiao, 1982)). The AB estimator is a GMM estimator for the first

differenced model relying on a greater number of internal instruments ((Arellano & Bond,

1991)). The null hypothesis is no autocorrelation. The presence of first order autocorrelation in

the differenced residuals does not imply that the estimates are inconsistent, but second-order

correlation would. Additionally, the Blundell-Bond estimator reports a Sargan test of over

identifying restrictions; the estimates should test significantly different from zero in order to

reject the null that over identifying restrictions are valid.

Using ‘xtlsdvc’ command in STATA, the estimator first produces uncorrected LSDV estimates

which then approximates the sample bias of the estimator using Kiviet’s higher order

asymptotic expansion techniques ((Bruno, 2005)). The estimation also includes one lag by
 43

default. Another estimator that could be used is the Blundell-Bond (BB) estimator. The BB

estimator assumes that the first differences of the instrumental variables are uncorrelated with

fixed effects and augments the AB estimator by allowing for introducing more instruments and

improve efficiency of the estimates ((Blundell & Bond, 1998)). Recent applications of

LSDVC includes (Sen and Jamasb ,2012) and (Nepal & Jamasb, 2013).

So, AH estimator of xtlsdvc command will be used to know the impact between dependent and

independent variables. It also calculates a bootstrap variance–covariance matrix for LSDVC

using # repetitions (# may not equal 1). The default is no bootstrap estimation of the variance–

covariance matrix and standard errors. Notice that the bootstrap continues to work in the

presence of gaps in the exogenous variables, although in this case, bootstrap samples for each

unit are truncated to the first missing value encountered. Gaps in the dependent variable,

instead, bear no consequence to the bootstrap sample size. Also consider that bootstrap standard

errors are downward biased when values for the unknown parameters are supplied through

matrix since the procedure in this case (keeping the values in my fixed over replications)

neglects a source of variability for LSDVC. This model helps to explain impact with different

estimators and its attributes like first requests that the first-stage regression results be displayed

and lsdv requests that the original LSDV regression results be displayed and vcov returns

bootstrapped coefficients.

2.8 Organization of the study

The study is organized into five chapters. Following the introductory chapter with review of

literature including both theoretical and empirical literatures on the public expenditure and

economic growth. Chapter two includes objectives and research methodology used for study.

Chapter three consist profile of selected countries. Chapter four deals with model estimation

and interpretation of results including key informant interview results. Finally, Chapter

five presents the conclusions and policy implications of the study.

44

2.9 Limitations of the study

This research is an attempt to measure the impact of selected public expenditures on

determinants of economic growth. The researcher has relied on the data from IFS, World Bank,

UNDP Reports and the central banks of BRIICS countries. While the data and inputs are

authentic, there is a risk of these inputs being diluted due to some factors:

• The major limitation of this study is non-availability of data of some expenditure

variables due to these three variables of expenditure are dropped for the study.

• China is the only country which has very limited data which made dataset smaller due

to its bureaucratic nature.

• Another major limitation is duration of study which is 24 years (annual observations)

because HDI was started in 1990 and

• This study is limited to six developing countries only.

2.10 Significance of the Study

Realizing the importance and contribution of Public Expenditure in economic growth,

this study captures the impact of selected expenditures on selected variable of economic of

developing countries. This research is significant to general public, ministries, foreign investors

and governments in different ways.

• For the policy and decision making process, each and every micro as well as macro aspects

are duly considered. Therefore in this study, the above said process has been adopted.

• This study shall be significant for ministry of finance, department of expenditure to decide

the future budget and Expenditure policy so allocate fund towards important segment.

• This study shall be significant to the policy makers of all level (national, regional and local)

to public expenditure management and helps the government to know, how much, from

where and in which sector the fund should be permitted.

 45

• This study shall be significant to general public by providing them the knowledge and

transparency about steps taken by government for public welfare and development in long

run.

• The study shall be significant to the government to look at their current position among

other emerging countries and take further steps accordingly.