Analyzing Fiscal Policies' Effect on Growth, Health & Education

This report investigates the impact of fiscal policies on economic growth, public health, and education in ten European countries (Austria, Belgium, Denmark, France, Germany, Italy, Netherlands, Spain, Sweden, and the UK). It analyzes data from 1980 and 2014 to understand the effects of public expenditure. The research aims to assess the influence of fiscal policies on economic growth, life expectancy at birth, and adult literacy rates. The study uses descriptive statistics, tests for equality, correlation analysis, and regression analysis to evaluate the relationships between government expenditure and economic growth, adult literacy rate, and life expectancy. The findings provide insights into the role of fiscal policy in driving economic growth and improving social welfare in the selected European countries. This report concludes with recommendations for policymakers based on the analysis of the data.

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
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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
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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.

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FISCAL POLICIES ON ECONOMIC GROWTH AND ITS EFFECTS ON PUBLIC
HEALTH AND EDUCATION
other researchers argue that increasing public investment in education sector helps the
concerned economy to generate more human capital11. This large number of human capital
further can help the country to produce more output. On the contrary, other scholars say that
education can only help the concerned economy through research and development12. Thus, it
does not play any significant role in the manufacturing sectors of the economy. Moreover, the
researcher also argues that increasing expenditures on health care can reduce sickness and
absenteeism and consequently improves standard of living of labours13.
Therefore, based on these previous studies the researcher has obtained various
relationships between fiscal policy and economic growth, health care and education. Some
researchers have stated a strong relationship between these factors whole others have stated
only normal relationships.
Keeping above-mentioned contradictory statements in mind, the paper chiefly focuses
on the effect of fiscal policy through analysing economic growth, health care and education.
The entire research work considers countries of European Union, due to significant impact of
fiscal policy over the countries during a certain period of time.
1.3 Research Aims:
Through discussing the impact of fiscal policy on economic growth, health care and
education, the paper chiefly intends to analyse the impact of this policy on ten countries of
the European Union. These countries are Austria, Belgium, Denmark, France, Germany,
Italy, Netherland, Spain, Sweden and the UK. Moreover, the paper also intends to understand
the condition of public health and education before implementing fiscal policy and after
implementing fiscal policy. Through conducting this research the paper can understand the
11 Deming, W. Edwards. The new economics for industry, government, education. MIT press, 2018.
12 Fitzsimons, Patrick. "Human capital theory and education." In Encyclopedia of educational philosophy and theory, pp. 1-4. Springer
Singapore, 2015.
13 Israel, Sabine. "How social policies can improve financial accessibility of healthcare: a multi-level analysis of unmet medical need in
European countries." International journal for equity in health 15, no. 1 (2016): 41.

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FISCAL POLICIES ON ECONOMIC GROWTH AND ITS EFFECTS ON PUBLIC
HEALTH AND EDUCATION
importance of fiscal policies on various aspects of an economy. For this, the paper selects
data from two years, which are, 1980 and 2014.
1.4 Research Objectives:
To know the impact of fiscal policy on EU countries, the paper set some research objectives.
These research objectives further can help the concerned researcher to make some research
questions through analysing which the paper can obtain its desired outcome. The paper also
analyses historical data regarding fiscal policy implementation in these ten countries. These
crucial research objectives are:
 To analyse various aspects of fiscal policies taken by the government of the chosen
ten EU countries
 To know the impact of fiscal policies on economic growth of these countries of the
European Union
 To analyse the effects of fiscal policies on the condition of life expectancy of birth of
these concerned countries
 To examine the effects of fiscal policies on adult literacy rate of citizens of these
selected countries
 To analyse historical data on life expectancy and adult literacy rate to understand the
impact of fiscal policies on these countries
1.5 Research Questions:
Based on proposed research aims and objectives, the researcher forms some research
questions. Through answering these questions, the paper can obtain its desired outcome. The
primary research question is:
 How do fiscal policies, implemented by the government of these ten European
countries, influence the economy, public health and education over there?

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FISCAL POLICIES ON ECONOMIC GROWTH AND ITS EFFECTS ON PUBLIC
HEALTH AND EDUCATION
To answer this primary question, the paper set some secondary research questions. These
questions are:
 How has the public expenditure of these selected ten European countries affected
economic growth over there?
 How has the specified expenditure influenced public health through stimulating
economic growth?
 How have the government expenditures regarding economic growth of these ten
European countries affected the educational attainment of people of these countries?
1.6 Problem statement:
Thus, the main problem of this research paper is to analyse the effect of fiscal policies on
ten selected countries of European Union. The paper chiefly highlights the issue of economic
growth, public health and education that can be changed with the help of public investment.
1.7 Rationale of the study:
Through obtaining the desired outcome, this research paper can state the actual role of fiscal
policy as an engine of growth. Moreover, this research work can further help economists to
understand the impact of fiscal policy on social welfare. Based on the direction of the
outcome, the paper can understand that whether implanting fiscal policy is good for health or
not.
1.8 Research hypothesis:
To conduct the research work statistically, the paper needs to set some research hypothesis.
In this paper, the researcher has selected three main research hypotheses. In every part, the
researcher set a null hypothesis (H0) and an alternative hypothesis (H1), which are mentioned
as follow:

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FISCAL POLICIES ON ECONOMIC GROWTH AND ITS EFFECTS ON PUBLIC
HEALTH AND EDUCATION
H1: Relationship between fiscal policies and economic growth in selected ten countries
of European Union
H10: Fiscal policy does not influence economic growth of chosen ten countries in EU
H11: Fiscal policy influences economic growth of chosen ten countries in EU
H2: Relationship between fiscal policies and education in selected ten EU countries
H20: Fiscal policy does not influence adult literacy rate in selected 10 European countries
H21: Fiscal policy influences adult literacy rate in selected 10 European countries
H3: Relationship between fiscal policy and Life expectancy in mentioned countries of
the EU
H30: Fiscal policy does not influence life expectancy in ten selected countries of the EU
H31: Fiscal policy influences life expectancy in ten selected countries of the EU
1.9 Structure of the study:
The entire research work is divided into various segments through an organised way. Thus
the paper has selected a structural framework as shown below: