Fiscal Policies on Economic Growth and Its Effects on Public Health and Education

Running head: FISCAL POLICIES ON ECONOMIC GROWTH AND ITS EFFECTS ON
PUBLIC HEALTH AND EDUCATION
FISCAL POLICIES ON ECONOMIC GROWTH AND ITS EFFECTS ON PUBLIC
HEALTH AND EDUCATION
Name of the Student
Name of the University
Author Note

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FISCAL POLICIES ON ECONOMIC GROWTH AND ITS EFFECTS ON PUBLIC
HEALTH AND EDUCATION
Abstract:
Fiscal policy has significant importance for developing a country’s economic condition
during long-run. After the occurrence of endogenous growth model, fiscal policy has become
one of the important concepts to discuss. International economies have experienced dynamic
conditions and this in turn has influenced welfare along with standard of living. For
understanding the impact of this fiscal policy, the paper has considered ten European
countries through analyzing data of 2014 and 1980. With the help of proper analysis, the data
can understand the impact of public expenditure in these countries.

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FISCAL POLICIES ON ECONOMIC GROWTH AND ITS EFFECTS ON PUBLIC
HEALTH AND EDUCATION
Acknowledgment
I am thankful to my Professor, family members and my friends, who help me to during my
research work.

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FISCAL POLICIES ON ECONOMIC GROWTH AND ITS EFFECTS ON PUBLIC
HEALTH AND EDUCATION
Table of Contents
CHAPTER ONE: INTRODUCTION........................................................................................6
1.1 Introduction:.....................................................................................................................6
1.2 Background of the study:.................................................................................................6
1.3 Research Aims:................................................................................................................8
1.4 Research Objectives:........................................................................................................9
1.5 Research Questions:.........................................................................................................9
1.6 Problem statement:.........................................................................................................10
1.7 Rationale of the study:...................................................................................................10
1.8 Research hypothesis:......................................................................................................10
1.9 Structure of the study:....................................................................................................11
CHAPTER TWO: LITERATURE REVIEW..........................................................................13
2.1 Introduction:...................................................................................................................13
2.2 Concept of fiscal policy and its important:....................................................................13
2.3 Impact of public expenditure on economic growth:......................................................14
2.4 Impact of public expenditure on education:...................................................................15
2.5 Relationship between fiscal policy and health care:......................................................17
2.6 Literature Gap:...............................................................................................................18
CHAPTER THREE: RESEARCH METHEDOLOGY...........................................................19
3.1 Introduction:...................................................................................................................19
3.2 Method Outline:.............................................................................................................19

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FISCAL POLICIES ON ECONOMIC GROWTH AND ITS EFFECTS ON PUBLIC
HEALTH AND EDUCATION
3.3 Research Onion:.............................................................................................................19
3.4 Research Philosophy:.....................................................................................................20
3.5 Research Approach:.......................................................................................................21
3.6 Research Design:............................................................................................................21
3.7 Data Collection Method:................................................................................................21
3.8 Data Sampling:...............................................................................................................22
3.9 Data analysis Plan:.........................................................................................................22
3.10 Ethical Consideration:..................................................................................................22
3.11 Limitation of the data collection method:....................................................................22
3.12 Summary:.....................................................................................................................23
CHAPTER FOUR: RESULT...................................................................................................24
4.1 Descriptive Statistics......................................................................................................24
4.2 Tests for equality............................................................................................................26
4.3 Correlation analysis............................................................................................................29
4.4 Regression Analysis.......................................................................................................32
CHAPTER FIVE: DISCUSSION............................................................................................37
5.1 Hypothesis 1: Evaluating Relation between government expenditure and economic
growth......................................................................................................................................37
5.2 Hypothesis 2: Evaluating Relation between government expenditure and economic adult
literacy rate...............................................................................................................................38
5.3 Hypothesis 3: Evaluating Relation between government expenditure and life expectancy
at birth......................................................................................................................................39

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FISCAL POLICIES ON ECONOMIC GROWTH AND ITS EFFECTS ON PUBLIC
HEALTH AND EDUCATION
CHAPTER SIX: CONCLUSION AND RECOMMENDATION...........................................41
6.1 Conclusion:....................................................................................................................41
6.2 Recommendations:.........................................................................................................42
References:...............................................................................................................................43
Appendix..................................................................................................................................50

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FISCAL POLICIES ON ECONOMIC GROWTH AND ITS EFFECTS ON PUBLIC
HEALTH AND EDUCATION
CHAPTER ONE: INTRODUCTION
1.1 Introduction:
The fiscal policy plays a significant role in the long-run growth process and consequently
becomes the central topic of macroeconomics after the occurrence of endogenous growth
models. Therefore, economists have discussed various types of fiscal policies, which act as
the chief driver of balanced growth1. The international economies have grown significantly
over the years through experiencing huge dynamics. These dynamic economies have also
influenced people based on welfare and standard of living. The governments of these
concerned countries have taken significant role to take proper policies based on this dynamic
growth for facilitating people. In general, the government policies can be divided into two
headings, which as, monetary policy and fiscal policy. Monetary policy deals with financial
as well as monetary aspects of the economy while fiscal policies consider investment,
consumption and public expenditures as well as their implications on society.
Considering this impact under consideration, the paper intends to observe the impact of
fiscal policies on economic growth of various countries. Moreover, to analyse the impact of
welfare of fiscal policies, the paper also intends to focus on public health as well as education
of these countries. For doing so, the paper especially selects some countries of the European
Union.
1.2 Background of the study:
Fiscal policies stimulate economic growth, inflation, employment, macroeconomic stability,
government expenditure and other macroeconomic variables. The effective fiscal policy
brings more macroeconomic stability across the country compared to monetary one2. This can
be seen accurately in the area of European Union that consists with sovereign countries.
1 Chau, Wong Hong. "Public Expenditure in a Simple Model of Economic Growth: The Case of Malaysia." Journal of Research in
Business, Economics and Management 8, no. 7 (2017): 1605-1616.
2 Mauro, Paolo, and Jan Zilinsky. "Fiscal Tightening and Economic Growth: Exploring Cross-Country Correlations." Policy Brief (2015):
15-15.

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FISCAL POLICIES ON ECONOMIC GROWTH AND ITS EFFECTS ON PUBLIC
HEALTH AND EDUCATION
These countries maintain their individual fiscal policies. Monetary policies or exchange rate
policies do not take any responsibilities to overcome any economic shocks in these countries
of the European Union. Thus, economic growth of these European countries heavily depends
on fiscal policies3. To achieve economic growth through implementing these policies, the
government can encourage aggregate demand or economic supply both in short-run and long-
run. Keynes inspired this demand side equation through considering improvement of
economic growth and reduction of unemployment4. In this context, the government stimulates
aggregate demand through imposing expansionary fiscal policy. This particular form of fiscal
policy reduces taxes and increases government expenditure5. According to economists, the
government could prefer increasing government expenditure compare to tax reduction. This
is because the multiplier of government expenditure provides higher value compare to the tax
change6. On the contrary, supply-side economics also considers fiscal power to control
recession within country7. In this situation, the government prefers to reduce various types of
taxes, such as profit tax, income tax and interest tax and so on.
Therefore, this theoretical model helps a researcher to construct a relationship between fiscal
policy and economic growth, based on endogenous growth model8. According to some
researchers, public spending can influence labour productivity as well as economic growth
through developing health care and accumulation of knowledge9. Other researchers have
observed a positive relationship between economic growths with schooling10. In this context,
3 Baker, Scott R., Nicholas Bloom, and Steven J. Davis. "Measuring economic policy uncertainty." The Quarterly Journal of
Economics 131, no. 4 (2016): 1593-1636
4 McCombie, John, and Anthony Philip Thirlwall. Economic growth and the balance-of-payments constraint. Springer, 2016.
5 Gadenne, Lucie. "Tax me, but spend wisely? Sources of public finance and government accountability." American Economic Journal:
Applied Economics 9, no. 1 (2017): 274-314.
6 Magazzino, Cosimo, Lorenzo Giolli, and Marco Mele. "Wagner's Law and Peacock and Wiseman's Displacement Effect In
European Union Countries: A Panel Data Study." (2015).
7 Dosi, Giovanni, Giorgio Fagiolo, Mauro Napoletano, Andrea Roventini, and Tania Treibich. "Fiscal and monetary policies in
complex evolving economies." Journal of Economic Dynamics and Control 52 (2015): 166-189.
8 Laeven, Luc, Ross Levine, and Stelios Michalopoulos. "Financial innovation and endogenous growth." Journal of Financial
Intermediation 24, no. 1 (2015): 1-24.
9 Heimberger, Philipp, and Jakob Kapeller. "The performativity of potential output: Pro-cyclicality and path dependency in
coordinating European fiscal policies." Review of International Political Economy 24, no. 5 (2017): 904-928.
10 Masum, Fahria, Liza Groenendijk, Reinfried Mansberger, and Audrey Martin. "Enhancing the role of surveyors: bridging the
gap between demand for and supply of professional education." In Proceedings of FIG working week 2017: Surveying the world
of tomorrow: from digitalisation to augmented reality, 29 May-2 June 2017, Helsinki, Finland. International Federation of
Surveyors (FIG), 2017.