An analysis and evaluation of emprical studies on public expenditure and economic growth

The relationship between public expenditures and economic growth has long been a subject of debate in the economics literature. These discussions, which hold a prominent position in the field, are rooted in the theoretical perspectives of Wagner and Keynes. This dissertation aims to provide a comprehensive analysis within a broad framework. To this end, the study is structured into five chapters, with the first chapter offering a wide-ranging examination of the literature by employing various analytical methods. The findings indicate that national and international collaborations in studies on this topic remain insufficient, that a limited number of researchers have authored multiple studies, and that contributions to the field vary between developed and developing countries. Secondly, rather than adopting country classifications established by international institutions such as the OECD, the World Bank, and the IMF, this study selects a sample based on countries with similar expenditure compositions. In line with this objective, the entropy method is employed to calculate the weighted distribution of expenditure components for each country, and WASPAS scores are derived accordingly. Based on these scores, countries are clustered using the K-Means method, and a sample of 15 countries, including Turkey, is selected for the third chapter. In the third chapter, the relationship between public expenditures and economic growth for 15 countries (Turkey, Austria, Germany, Australia, Belgium, Denmark, Finland, France, Netherlands, Iceland, Ireland, Israel, Sweden, United Kingdom, Canada, and South Korea) over the period 2004–2022 is examined using the PFTY causality test. The findings confirm the validity of the Keynesian and Wagnerian hypotheses for different countries, while for some countries, no empirical support for either hypothesis is observed. The fourth chapter focuses on Turkey and investigates regional differences in the validity of the hypotheses based on the NUTS (Nomenclature of Territorial Units for Statistics) classification, conducting tests accordingly. The results reveal that the validity of the hypotheses varies between developed and developing regions. The final chapter conducts time series analyses of Turkey's public expenditure and economic growth variables for the period 2004Q1–2024Q3 using Fourier function-augmented methods that account for structural and cyclical breaks. The findings indicate that public expenditures play a decisive role in Turkey's economic growth, with Keynesian dynamics becoming more dominant. This outcome aligns with Turkey's economic fundamentals and supports Keynes's theoretical assertion that public spending is a key driver of growth in developing economies.