Optimal Government Budget Allocation According to Aggregate Welfare using Generalized Method of Moments

Authors

  • Nouri, Ali Heydar Ph.D. Student in Economics-Economic Development, Faculty of Management, Department of Economics, Economic Development, Islamic Azad University, Arak Branch, Markazi Province, Iran.
  • Sarlak, Ahmad Assistant Professor, Faculty of Management, Arak Branch of Azad University, Markazi Province, Iran
Abstract:

How should the government budget be allocated to public education, higher education, health, transportation, IT, energy, or indirect public services including expenses on laws and regulations, business governance, and tax reforms. We examine data between 1989 and 2019 of public spending and their outcomes for each affair and title. The results show that despite that number of students declined over time, the spending on public education has been raised. The structural model is estimated by generalized method of moments, and the estimates show that households put significant weights on education and health, as well as energy. However, even with considerable weights on these public goods, due to inefficient production of public services, the counterfactuals illustrate that more spending on tax reform, business environment, and governance relative to actual budget is optimal.

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Journal title

volume 26  issue 4

pages  65- 91

publication date 2022-03

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