Abstract:

This study aims to explore the relationship between public spending and economic growth in OECD countries. In this context, public expenditure is divided into subcomponents in the form of education, health, defence and total public expenditure and 4 separate models are created and panel symmetric and asymmetric causality tests are implemented using data from the period 1995-2016. According to the results of the symmetrical causality test, the Keynesian hypothesis is valid between health and defense spending and economic growth. Between the total public expenditure and economic growth, between the Wagner hypothesis and the education expenditure and the economic growth, both the Keynesian and Wagner hypothesis are valid. According to the asymmetrical test results, in which the causal relationships were studied on the basis of the positive and negative source, the Keynesian hypothesis was found to apply among the positive components in the 4 model. In terms of negative components, between education and defense expenditure and economic growth, Wagner’s hypothesis, between health and total public expenditure and economic growth, both Keynesian hypothesis and Wagner’s hypothesis are valid. These findings show that economic growth and public spending in general support each other and that public spending is of great importance, especially in the policies to be implemented for sustainable economic growth.