The asymmetric impact of government expenditure on economic growth: Evidence from a NARDL model

Since the 2011 Revolution, Tunisia has faced significant economic
development challenges. Government spending plays a crucial role in
fostering economic growth. This study focuses on Tunisia from 1980 to 2022,
considering factors like foreign direct investment (FDI), trade openness,
capital, and labor. It particularly examines spending in four government
sectors: agriculture, education, health, and military. Using the Non-linear
Autoregressive Distributed Lag (NARDL) model, the study investigates how
these sectoral government expenditures relate to Tunisia's gross domestic
product (GDP). The findings suggest that the relationship between these
factors and GDP is complex. For instance, increases in trade openness and
FDI generally lead to GDP growth. Similarly, changes in the labor force
impact GDP differently in the short and long term, with negative and positive
changes eventually benefiting the economy, but positive changes can initially
decrease GDP. The study also finds that government spending on agriculture
and health positively affects GDP, whereas spending on military and
education has a negative impact. To enhance government spending and
stimulate economic growth in Tunisia, the study recommends addressing
corruption, inefficiency, and waste. It emphasizes the importance of directing
public funds towards infrastructure, particularly in the education and
military sectors, to improve welfare and support productive activities.