Abstract:

Determining what direction public spending is in relation to economic growth is important for policy makers, as it will be a guide in policy decisions. There are two different ideas on the direction of the relationship, one of the Wagner Law and the Keynesian Theory. The Wagner Law suggests that growth increases public spending, and the Keynesian Theory suggests that growth increases public spending. This study aims to identify whether and if there is a causal relationship between growth and education, taking into account public expenditure, health and defense expenditure. In this study for Turkey, data from the 2007:Q1-2021:Q1 period have been applied to Granger and Toda-Yamamoto causality tests. The findings show the existence of a causal relationship to the growth of education, health and defence spending in Turkey during the study period.

Abstract:

Determining the direction of the relationship between public expenditures and economic growth is important for policy makers as it will guide policy decisions. There are two dissimilar ideas on the direction of the relationship in question, one being Wagner's Law and the other Keynesian Theory. In Wagner's Law, it is suggested that there is a causal relationship like that growth increases public expenditures, and in the Keynesian Theory, an increase in public expenditures provides growth. This study aims to determine whether there is a causal relationship between economic growth and public expenditures specific to education, health and defense expenditures and its direction, if any. In this study done for Turkey, Granger and Toda-Yamamoto causality tests were applied with the data of the period 2007:Q1-2021:Q1. The results obtained show the existence of a causal relationship from education, health, and defense expenditures to growth in Turkey during the examined period.

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