Government expenditure

Definition Government expenditures Means all the expenditures of the public sector from a state. The definition includes different sectors: it is an addition of the consumption of the government, investment, interest expenses, and expenditures for subsidies. Seite 229/233 world bank Gleichung G=

FOLIE 181 world bank: The government has a really big impact on the economy, because of their size. With the use of high taxes and subsidies there is a benchmark for the control of the economy. High budget deficits make it harder to control the money supply and thus the probability of a higher inflation.

Total expenditure of the government

This definition includes current and capital expenditures but without lending and the corresponding repayments.

Goods and services: That means all governmental payments for goods and services, could be for example the wage for workers.
Wages and salaries: only defines the cash payments in return for services before the subtraction of taxes.
Interest payments: payments made to sectors for borrowing money. It doesn’t include governmental loans.
Subsidies and other transfers include all non-repayable transfers to public and private companies. in addition, it also includes the costs of covering liquidity deficits.
Capital expenditure: This defines as an increase through fixed capital assets, property, intangible assets, government inventories, and non-military and non-financial assets.

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Examples of government expenditures

One category mentains thinghs like infrastructure, that means roads, airports, R&D etc. Those exampels improve the output. The other category includes things like education to achieve a better technology development. Glomm 1997 productive government expenditures and lon run growth page 201/202

Those two examples have a huge impact on the long run of a economy 201/202

Impact of Globalization on the composition of Government expenditures

Different kinds of government expenditures react differently to globalization. Through globalization, the governments got more pressure and decide to concentrate more on capital expenditures. As a result, it shows that using econometric analysis, there is no impact on the composition of government expenditures through globalization. Literature shows three possible explanations for this result. The efficiency and compensation effects could neutralize each other. Additionally, there could be indirect effects between the expenditure categories. The last reason the effects of globalization may not exist is because of overstating the topic. The impact of globalization on the composition of government expenditures: Evidence from panel data Axel Dreher · Jan-Egbert Sturm · Heinrich W. Ursprung