The relationship between public expenditures-growth within the framework of new institutional economics: An empirical analysis about countries, which have different level of development

The impact of the growth of public expenditures is an issue that economists can not agree on long-standing. In this context, different ecoles have made a different claims and empirical studies gives different results like claims. These claims, which seem to contradict each other, were originally thought to be originated from the differences in the institutional structures of the countries and in this context, 175 countries classified as four groups by United Nations Development Agency according to annual Human Development Index in order to understand how public spending affected the growth of countries with different institutional structures. In this context, empirical model consist of cross-sectional dependency, unit root test, panel data fixed effect analysis, panel data random effect analysis, hausman test, heteroscedasticity test, autocorrelation test and Panel Corrected Standard Errors Model (PCSE). Government expenditure has been minimum effective in countries which have high institutional development, this efficiency has increase in group of developing country and has reached maximum level in less developed countries. Consequently negative correlation has been detected between institutional development level and efficiency of government expenditures.