Government Expenditure and Human Development Index in Singapore (1990-2019)

Abstract

This research is about the quality of life and government spending in Singapore to improve the welfare of its citizens. In this sense, the purpose is twofold. First, finding out whether government spending to provide goods and services to the population is driven by tax revenues. And second, testing whether the Human Development Index (HDI) benefits from research and development (R&D) spending. Koyck's methodology was used to estimate two distributed lag models, using annual data for the period 1990-2019. The first model confirms the positive long-run relationship between tax revenues and government spending. This is achieved in Singapore thanks to the efficient use of fiscal resources, despite being a low-tax country. The second model reported no relationship between HDI and R&D spending, suggesting that this spending does not impact the HDI´s components, life expectancy, income and education. Therefore, it is concluded that Singapore's tax policy, through tax revenues, has contributed to increased government spending, and thus to the provision of goods and services to its population. But contrary to what one might think, when spending is particularly allocated to research and development, there is no effect on the quality of life of citizens, as represented by the HDI.