Optimum Budget Expenditures Having a Maximum Influence on the Personal Income Per Capita: The Case of Azerbaijan

Abbasov, Jeyhun

doi:10.2139/ssrn.2365666

Cited by 2 publications

(3 citation statements)

References 5 publications

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“…Besides that, Abbasov and Aliyev (2018) tested Wagner's law and Keynesian hypothesis in selected post-Soviet countries and found that there is a long-run relationship between total GDP and government expenditures in Azerbaijan. In addition, Aliyev (2018), Hasanov and Mammadov (2010), Hasanov et al (2018), Hasanov et al (2016), Aliyev and Mikayilov (2016), and Abbasov (2012 have devoted research to the role of fiscal policy in the development of the economy in Azerbaijan. Abbasov (2018) investigated the optimal allocation of government revenue between capital and current expenditures and found that optimal shares of government capital (𝜔 1 * ) and current (𝜔 2 * ) expenditures are equal to 0.248 and 0.752, respectively.…”

Section: Literature Reviewmentioning

confidence: 99%

A new simple test to evaluate the efficiency of government spending

Abbasov

2023

Economics &Amp; Sociology

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The main purpose of this study is to determine the conditions that enable optimal distribution of the government revenues between capital and current expenditures, one that would maximize the firms’ and households’ utility and provide the maximum impact of the government expenditures on economic growth rate. Research indicates that for such optimal distribution of the budget to be defined, the derivatives of output functions with respect to the government capital expenditure and the government current expenditure must be equal. The obtained theoretical results serve as a basis for a test that analyzes the efficiency of the allocation of government revenues between current and capital expenditure items. The test is based on intervals established at significance levels of 0.01-0.99. If the difference between the marginal value of the production function with respect to the government's current and capital expenditure falls into any of these established intervals, the distribution of government expenses in these two directions can be considered effective at the level of significance corresponding to that interval. Research results found that governments usually cannot efficiently allocate their revenues between capital and current expenditures.

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Section: Literature Reviewmentioning

confidence: 99%

A new simple test to evaluate the efficiency of government spending

Abbasov

2023

Economics &Amp; Sociology

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“…Besides that, Abbasov and Aliyev (2018) between total GDP and government expenditures in Azerbaijan. Abbasov (2012Abbasov ( , 2013 estimated the dependence of income per capita on the state budget expenditure items. In doing so, Abbasov (2012Abbasov ( , 2013 didn't use any other explanatory variable, which is the main drawback of the analysis as documented in Aliyev and Mikayilov (2016).…”

Section: Source: Own Compilationmentioning

confidence: 99%

“…Abbasov (2012Abbasov ( , 2013 estimated the dependence of income per capita on the state budget expenditure items. In doing so, Abbasov (2012Abbasov ( , 2013 didn't use any other explanatory variable, which is the main drawback of the analysis as documented in Aliyev and Mikayilov (2016). Fortunately, Aliyev and Mikayilov (2016) partially solved this problem by using the oil factor as an explanatory variable in their model.…”

Section: Source: Own Compilationmentioning

confidence: 99%

Does the COVID19 pandemic change the relationship between government expenditures and economic growth in Azerbaijan?

Abbasov¹,

Gulaliyev²,

Ahmadov³

et al. 2021

Economics &Amp; Sociology

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This paper investigates the impact of the Government's capital and current expenditures on economic growth in Azerbaijan. The estimation strategy of the research consists of two directions. First, all estimation approaches were used for the period of 2005Q1-2019Q4. The estimated model for this period is called Model 1. Second, the model which is called Model 2 was estimated for whole period of 2005Q1-2021Q1. This approach allows comparing the role of the Government expenditures on non-oil economic activity in normal times and during the COVID-19 pandemic in Azerbaijan. Estimations show that coefficients characterizing the impact of Government current expenditures and capital expenditures on non-oil economic growth are almost the same for both periods. Therefore, we can state that COVID-19 pandemic did not affect the structure of the relationship between Government expenditures and non-oil economic growth. Results show that 1 percent increase in capital and current expenditures of state budget increases the real non-oil GDP by 0.10 and 0.40 percentage points, respectively. Accordingly, both capital and current expenditures of the state budget have positive impact on the real non-oil GDP growth for the both periods. This is in contrast to findings in the literature, which argue that increasing current expenditures financed by tax hikes lead to a lagged decrease in private investment, having an overall negative impact on economic growth. We attribute this opposing finding to the Azerbaijani state budget revenue system, which is financed by transfers from the State Oil Fund (Stabilization Fund). Thus, large government investment and social projects mostly rely on non-tax sources. Therefore, we argue that positive impact of capital and current expenditures of government budget on non-oil GDP seems plausible for Azerbaijan. Another result of our estimation is that expansion of economic openness accompanied by non-oil economic growth plunge in Azerbaijan. We interpret this phenomenon with very low share of non-oil export, where openness is mostly caused by increase in import volume.

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Optimum Budget Expenditures Having a Maximum Influence on the Personal Income Per Capita: The Case of Azerbaijan

Cited by 2 publications

References 5 publications

A new simple test to evaluate the efficiency of government spending

A new simple test to evaluate the efficiency of government spending

Does the COVID19 pandemic change the relationship between government expenditures and economic growth in Azerbaijan?

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