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State governments create fiscal policies, but not all state policy decisions result in better economic performance. Economic performance depends on taxes and types of expenditures. The composition of public expenditures also is considered the instrument for promoting economic growth. This study attempts to examine how different types of expenditures (highway, education, and welfare expenditure) influence economic growth, as measured by change of gross state product (GSP) using a panel data set from 1998 to 2013. The results indicate that a high proportion of highway expenditure and education expenditure are positively related to economic growth rate. In addition, a high level of welfare expenditure is positively related to a state's economic growth rate. |
