The impact of educational expenditures of government on economic growth of Iran
| Autor | Fozieh Jeyhoon Tabar - Zahra Najafi - Yaser Sistani Badooei |
| Cargo | Lecturer in Baft Higher Education Center, Shahid Bahonar University of Kerman - Lecturer in Payam e Noor University of Kermanshah - Lecturer and Researcher at the Department of Economics |
| Páginas | 217-235 |
217
AD-MINISTER
FOZIEH JEYHOON TABAR
ZAHRA NAJAFI
YASER SISTANI BADOOEI
JEL: H, G, E, C
Received: 18-07-2016
Modified: 21-11-2016
Accepted: 14-12-2016
DOI: 10.17230/ad-minister.30.11
www.eafit.edu.co/ad-minister
Creative Commons (CC BY-NC- SA)
AD-minister Nº. 30 january-june 2017 pp. 217 - 235 · ISSN 1692-0279 · eISSN 2256-4322
THE IMPACT OF EDUCATIONAL EXPENDITURES OF
GOVERNMENT ON ECONOMIC GROWTH OF IRAN
EL IMPACTO DEL GASTO PÚBLICO EN EDUCACIÓN EN EL CRECIMIENTO ECONÓMICO DE IRÁN
FOZIEH JEYHOON TABAR ZAHRA NAJAFI YASER SISTANI BADOOEI
ABSTRACT
Using the annual data of Iran’s economy from 1981-2012, this study examines Wagner’s law and the
Keynesian hypothesis about the relationship between the real government expenditure and the real GDP.
In this regard, this paper investigated the relationship between the total government expenditure, the
GDP and the relationship between government educational expenditure and GDP using bivariate and
multivariate models. The multivariate model is used to reduce the specified error issues that has not
been considered in many studies. The co-integration was examined using the auto regressive distributive
lag method (ARDL) of both long-term and short-term relationships. In making the estimations of the
Wagner’s view, the variables: real GDP, capital stock and labor force stock respectively, had a positive, a
negative, and a positive impact on total government expenditure and the long-term relationship is true
in this regard. Additionally, in the estimation of Keynesian model, the educational expenditures, unlike
real expenditures of government, had a long-term relationship. In addition, the variable, capital, in both
models had a similar effect on the real GDP, and the labor force coefficient in the presence of the total
expenditures and educational expenditures were negative and positive respectively.
KEYWORDS
Wagner; Keynes; total expenditures; educational expenditures; government expenditure; ARDL; ECM.
RESUMEN
Utilizando datos anuales de la economía de Irán desde 1981 hasta 2012, este estudio examina la Ley
de Wagner y la hipótesis keynesiana en cuanto a la relación entre el gasto público real y el PIB real. En
este aspecto, este artículo investigó la relación entre el gasto público total, el PIB y la relación entre el
gasto público en educación y el PIB usando modelos bivariables y multivariables. El modelo multivariable
es utilizado para reducir los errores específicos que no han sido considerados en muchos estudios. La
co-integración fue examinada utilizando el modelo autorregresivo con retardos distribuidos (ARDL, por
sus siglas en inglés) tanto para las relaciones a largo como a corto plazo. Al realizar las estimaciones de
la perspectiva de Wagner, las variables: PIB real, capital social y fuerza laboral, tuvieron, respectivamen-
te, un efecto positivo, negativo y positivo en el total del gasto del gobierno y la relación de largo plazo es
verdadera en este sentido. Adicionalmente, en la estimación del modelo keynesiano, los gastos educati-
vos, a diferencia de los gastos públicos reales, tuvieron una relación de largo plazo. Además, la variable
1 Lecturer in Baft Higher Education Center, Shahid Bahonar University of Kerman. She has several
publications in national and international journals and participated in several conferences. Her main
areas of interest are: public finance, public choice, fiscal illusion, institutions, economic development
and private sector development. Institutional Email Address: Jeyhoontabar@uk.ac.ir
2 Lecturer in Payam-e-Noor University of Kermanshah. She has several publications in national and in-
ternational journals and participated in several conferences. Her main areas of interest are: international
trade, public finance, and institutions. Institutional Email Address: najafi.29@pnu.ac.ir
3 Lecturer and Researcher at the Department of Economics, Baft Higher Education Center, Shahid
Bahonar University of Kerman. He has several publications in national and international journals and
participated in several conferences. yaser is author some of academic articles in economics in Persian
and English. His main areas of interest are: financial economy, econometrics, economic development,
urban economics and energy economy. Institutional Email Address: yr.sistani@uk.ac.ir
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AD-MINISTER
Fozieh Jeyhoon Tabar · Zahra Najafi · Yaser Sistani Badooei
The impact of educational expenditures of government on economic growth of Iran
capital, en ambos modelos tuvo un efecto similar en el PIB real y el coeficiente de fuerza laboral en presencia de
los gastos totales y los gastos en educación fueron negativos y positivos, respectivamente.
PALABRAS CLAVE
Wagner; Keynes; total de gastos; gastos educativos; gasto público; ARDL; ECM.
INTRODUCTION
The relationship between the government expenditure and national production is
important for issues related towards policy making. For example, in a recession, the
authorities try to save the economy by increasing the share of public expenditure
to GDP. The issue of public sector intervention towards controlling short-term
fluctuations in economic activities has always been discussed among economists.
However, classical economists disagree with such measures of government, while
they propose Keynesian fiscal policy to improve the economy in periods of recession.
Classical economists believe that market forces are able to guide economy to a long-
term equilibrium through moderations in the labor market. But Keynesians believe
that self-regulation mechanism is unable to improve the economy due to labor
market inflexibilities. To avoid long-term recessions, Keynesian economists propose
expansionary fiscal policies. As a result, there are two alternative situations for these
two directions of opposed causality. One situation is presents a trajectory from
expenditures to income (for the case of Keynesians) and the other situation presents
a trajectory from the income to public expenditures (for Wagner theory) (Magazzino,
2012). Examining the reasons for increased government expenditures is one of the
key issues in the economy for the public sector. Many theories have been proposed
in this regard. They can be divided into two general categories of economic theories
situated at the micro and macro levels. Wagner’s law is one of the macroeconomic
theories in the field. Wagner’s law is the first and most famous model to determine
public expenditures (Akitoby et al.,2006). The famous German economist Adolph
Wagner (1835-1917) proposed his theory in 1883 with regard to developing government
expenditure. According to Wagner, there is a linear relationship between the growth
of government activities and economic growth. Additionally, the rate of public sector
growth is higher than economic growth. At the same time, market ineciencies
especially in the case of externalities or that of superior goods make government
interventions necessary towards supplying optimal value in the supply of the goods
and services by facilitating subsidies and direct supply. Wagner also states that
the goods supplied by the public sector have higher income elasticity. According
to the way of Keynesian thinking, the public sector expenditure is an important
tool in developing and increasing economic activity. In the Wagner hypothesis,
the direction of a causality emanates from economic growth and development to
government expenditures. He examined the growth of the public sector in a number
of European countries, America and Japan in the nineteenth century. Wagner
defines the factors determining the impact of relative growth of the public sector on
GDP in terms of political and economic factors. Wagner’s law or Wagner’s theory,
especially since 1960s, has attracted much attention. This hypothesis has been tested
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