Role of Fiscal Policy in the Economic Welfare: A Case Study of Pakistan

Abstract

This research paper intends to look at the significance of the government expenditures in various sectors, investment by the private sector, and current account conditions on the well-being of the citizens in Pakistan over the duration of 1972-2021, making use of the Autoregressive Distributed Lag (ARDL) structure. This study additionally checks out disaggregated levels of government spending, with a particular concentration on the social sector (health and health as well as additional education), economic services, subsidies, as well as the maintenance of law and order. The research concern settled in this study is: Do the public sector’s economic actions improve the financial condition of the society through the increase in per capita income and employment opportunities, or do they trigger misallocation of public sources as well as injury to eco wellbeing of the society? The study also analyzes the impact of changes in the structure of the federal government's investment in time in addition to determining quick- and durable outcomes for crucial macroeconomic variables. The empirical results reveal that all parts of federal government expenses have considerable long-run organizations with per capita income, a certain welfare variable, besides spending on law and order, which has an unfavorable, nonetheless statistically insignificant impact. In terms of job opportunities, the federal government's expenses on education and learning have a considerable long-term favorable impact on employment. Nonetheless, expenditures on health have a significant unfavorable impact on employment. Different various other parts of federal government expenses did not substantially support employment. This study supplies valuable insights into the relationship between federal government costs and well-being in Pakistan. The browsing may give some requirements for focusing on the allowance of development in addition to the non-development budget to improve the welfare of Pakistani people.