Public spending and economic growth in the rentier state: The case of Kuwait

Abstract

This paper examines the validity of Wagner’s hypothesis in Kuwait looking specifically at government expenditures in health, education and infrastructure. Using time series analysis, the paper has found a long-run equilibrium relationship between GDP growth and the specified government expenditures. It, however, only found one causal relationship between development expenditures and GDP growth. As such, the paper proposes an expansion in government spending on development projects and reevaluates budget allocation in health and education.