Public expenditure, economic growth and poverty alleviation

an article by Ritwik Sasmal (Department of Economics, University of Konstanz, Germany) and Joydeb Sasmal (Department of Economics with Rural Development, Vidyasagar University, Midnapore, India) published in International Journal of Social Economics Volume 43 Issue 6 (2016)

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.

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The role of the public sector in combating inequality

an article by Christoph Hermann (FORBA – The Working Life Research Centre, Vienna and ILO) published in International Journal of Labour Research Volume 6 Issue 1 (2014)

Abstract

In the last decades, the merits of the public sector, including public infrastructures and services, have mostly been discussed with respect to their efficiency. Little attention has been paid to the redistributive effects of public services – despite the fact that equal access to essential services such as health care, education, transport and energy benefits low-income earners more than high-income earners and contributes to social equality.

This has several dimensions:
first, the (cash) value of public services as a proportion of income is greater for low-income households; for example, low-income earners use public transport more frequently.
Second, the public sector provides comparably decent jobs for low-skilled and marginalized workers, and wage inequality tends to be lower than in the private sector.
Third, the public sector guarantees of equal treatment of all citizens by providing the same service for everyone.

However, privatization, marketization and, more recently, the public sector cuts imposed in response to the financial crisis have undermined the redistributive effect of public services.

Full text (PDF 16pp)

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