Determinants of the Size of the Government Expenditure: An Empirical Study on Bangladesh

Abstract

Analysis of the nature of government expenditure constitutes a central concern in economic literature. This is because many countries of the world consistently have increased the size of government expenditure. Bangladesh has done the same practice over the last few decades. There is a need to investigate the factors which determine the size of the public spending of Bangladesh. The error correction modeling technique for the short-run dynamic equation and ordinary least square (OLS) for long-run static equation are used over the period 1973 to 2016 to this purpose.  The results of the short run dynamic equation and long-run static equation showed that external debt, real GDP, urbanization, tax, and non-tax government revenue positively influence the government expenditure where dependency on foreign aid and trade openness adversely affect it. The study recommends that the government should take proper step to expand the revenue base, stimulate the economic growth and reduce the external debt, and foreign aid.