The impact of government expenditures on human welfare: An empirical analysis for Pakistan

Abstract

Fiscal policy is used to improve human development, reduce poverty and stabilize economic growth. This study explores the relationship among human development index, defense expenditures, and non-defense expenditures for Pakistan. It uses autoregressive distributed lag model for investigating the long run and short run impacts of different types of expenditures on human development. The findings show that in the long run per capita income, health expenditures, recurrent expenditures and development expenditures have positive effects on human development, while the impact of defense expenditures is insignificant. It is interesting to note that although defense expenditures have insignificant effect however the military government regime has positive impact on human development. The study suggests investing in human capital to improve human development in Pakistan.