SOCIAL EXPENDITURES AND ECONOMIC DEVELOPMENT : THEORY AND EVIDENCE

Abstract

Economics is the study of how people and societies choose to allocate scarce resources and distribute wealth among one another and over time. Essentially, one must understand the objects of choice and method of choice. In particular, this thesis shall investigate the allocation of resources to the category of social expenditures in the process of economic development. In addition, the role of social expenditures in economic development will be examined, or simply, the question of whether social expenditures lead to economic development will be investigated. It is rather difficult to discuss economic development without considering aspects of social development. Since economics today tends to play an important role in development theory and planning, attempts are frequently being made to bring the social factors and their interrelations with economic factors into a framework of quantitative measurement and analysis. In this present study, education, health and social welfare conditions are measured by expenditures in respective categories rather than by proxies such as primary school enrolment rate, literacy rate, number of hospital beds and number of welfare institutions. The relationships between economic and social factors, in particular, GDP per capita and social expenditures, will be analysed by means of appropriate statistical techniques and econometric models. The main objective of this academic exercise is to examine the relationship between social expenditures and economic development. Many studies have been made to explore the relationship between government expenditure and economic growth but few have dealt with social expenditures and economic development. Both the theoretical and empirical analyses are still in the early stages of development. Hence, the true nature of the relationships is still very much clouded. This study seeks to analyse the relationship between social expenditures and economic development by using correlation and regression techniques. The case of Singapore is particularly highlighted in the empirical analysis.