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The Demand for Current Public Expenditure in Fiji: Theory and Empirical Results

Authors
Publication Date
Source
Legacy
Keywords
  • H4 - Publicly Provided Goods
  • H5 - National Government Expenditures And Related Policies
Disciplines
  • Economics
  • Medicine
  • Political Science

Abstract

This paper analyses current government expenditure in Fiji using annual time series data for the period 1969-1999. Alternative theories of government expenditure are reviewed and a distinction is made between economic/apolitical determinants and institutional/political determinants. Categorising the literature in this way suggests the application of non-nested tests in empirical work, which is reported elsewhere. All non-nested tests lead to the conclusion of double rejection. Therefore, a parsimonious comprehensive model, encompassing both economic and institutional variables, is preferred as it passes all diagnostic tests and exhibits no sign of misspecification. The Engle-Granger two-step procedure has been applied to analyse both long- and short-run determinants of public expenditure. The paper presents the first empirical estimates of the own-price elasticity of demand and income elasticity of demand for current public expenditure in Fiji.

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