The Impact of Budget Expenditures on Economic Growth and Income Distribution: A Provincial Analysis in Iran

Abstract

The budget system in Iran has been one of the most controversial issues. The government budget is generally divided into two parts: revenues and expenditures, and its expenditures in the general government budget are divided into three parts: expenditure credits, acquisition of capital assets, and acquisition of financial assets. The two parts of expenditures and capital assets constitute more than 90% of the expenditures of the general government budget. The present study, using the model of estimating the fixed effects of the panel and using annual data (2008-2017), the impact of four items of expenditure credits and acquisition of capital assets (economic, welfare, education, and health) in different provinces on economic growth and provincial Gini coefficient is investigated. The most innovative feature of this study is the use of final budget expenditure data in the two sections of cost credits and acquisition of capital assets by province. The results show that the acquisition of capital assets, compared with expenditure credits, has a greater impact on economic growth. Welfare spending in the expenditure credit sector has helped to reduce the class gap, and also, contrary to the expectations of the JCPOA agreement, has not been able to improve the class gap in the country due to its lack of impact on employment.

Keywords

• expense credits
• construction credits
• gini coefficient
• provincial budget
• panel data