NON-LINEAR IMPACT OF GLOBALISATION TO PUBLIC OUTLAYS IN MIDDLE INCOME COUNTRIES
DOI:
https://doi.org/10.24191/joa.v14i2.12067Keywords:
Government expenditure, globalisation, efficiency and compensation, cubic relationships.Abstract
This research objective to investigate the role of globalisation on government expenditure and government education expenditure in middle-income countries with a non-linear approach. This study uses a sample of 66 countries for Middle-Income Countries (MIC) and 126 countries for The World. Data are from the IMF, World Bank, Konjunkturf orschungs stelle (KOFF) and other reliable sources, compiled annually from 1960 to 2024. These studies use simple panel dynamic regression of Generalised Method of Moments (GMM). This study also investigates the government expenditure ()and government education expenditure () influence of other exogenous variables, such as GDP growth, unemployment and age dependency, that follow the efficiency and compensation in globalisation school. Furthermore, the robustness model is checked by other main control variables of globalisation. In globalisation main variables is globalisation index (KOFF_ALL) substitute with economic globalisation index (KOFF_ECGI), political globalisation index (KOFF_POGI), and social globalisation index (KOFF_SOGI) on government expenditure () and government education expenditure (). The study's results show a positive cubic correlation between globalisation and government expenditure. A positive linear correlation exists between globalisation and government expenditure, while a positive cubic correlation quadratic is observed in the World relationship. Supporting the efficiency and compensation in the globalisation school of thought, which is interested in globalisation on government expenditure issues, there exists a positive and negative correlation, the fundamentals of a cubic relationship. However, the overall World cubic model indicates that Lower Middle-Income Countries (LMC) have high government expenditure, but Upper Middle-Income Countries (UMC) have lower government expenditure. A negative correlation exists between globalisation and government expenditure in UMC caused by saturation in economic development. Higher globalisation creates lower government expenditure, especially in more advanced developing states. Furthermore, High-Income Countries (HICs) exhibit a positive correlation because advanced state growth, globalisation, and government expenditure are positively associated, driven by innovation. Support the idea of efficiency and compensation globalisation with the existing positive cubic relationship. While the efficiency argument (globalisation negative to government expenditure) and compensation argument (globalisation positive to government expenditure) seem correlated to the linear approach, efficiency and compensation indicate more in the non-linear approach. This correlation also indicates indirect causes of the middle-income trap problem.
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