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Trends and Composition of Public Expenditures: A Global and Regional

Perspective
Article in European Journal of Development Research · July 2015

DOI: 10.1057/ejdr.2015.26
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Original Article
Trends and Composition of Public Expenditures: A Global and Regional
Perspective
Bingxin Yua, Shenggen Fana and Eduardo Magalhãesb
a
IFPRI (International Food Policy Research Institute), Washington DC, USA.
b
Datalyze Consulting Corp., Ottawa, Ontario, Canada.
Abstract This article examines trends in, and composition of, public expenditures for 147 countries
from 1980 to 2010. Total public spending has increased significantly for these countries as a whole. While
the developed world still accounts for the majority of absolute size of spending, some regions in the devel-
oping world (particularly in Asia) have observed a rapid expansion mainly due to their robust economic
growth. Developing countries have also outperformed their developed counterparts in investments in pro-
ductive sectors such as agriculture and infrastructure when measured as their shares of total spending. Both
developing and developed countries have observed substantial growth of social protection spending, with
growth in developed countries much more pronounced. Over the period of 1980–2010, the level and com-
position of public expenditure in the social sector and social protection diverged across regions but con-
verged in agriculture and infrastructure expenditure.
Ce document examine les tendances en, et la composition des, dépenses publiques pour les 147 pays de 1980
à 2010. Le total des dépenses publiques a augmenté de manière significative pour l’ensemble de ces pays.
Alors que le monde développé représente encore la majorité du montant absolu des dépenses, certaines
régions du monde en développement (en particulier en Asie) ont observé une expansion rapide principale-
ment en raison de leur forte croissance économique. Les pays en développement ont également dépassé leurs
homologues développés quant aux investissements dans les secteurs productifs tels que l'agriculture et
l'infrastructure, lorsqu’on observe la proportion de ces investissements par rapport à leurs dépenses totales.
Les pays développés et en développement ont tous observé une croissance importante des dépenses de
protection sociale, avec une croissance beaucoup plus prononcée dans les pays développés. Au cours de
la période de 1980–2010, le niveau et la composition des dépenses publiques dans le secteur social et la
protection sociale sont disparates entre les régions, mais sont similaires en ce qui concerne les dépenses
agricoles et d'infrastructure.
European Journal of Development Research (2015) 27, 353–370. doi:10.1057/ejdr.2015.26

Keywords: public spending; government expenditure; agriculture; social protection; regional analysis
Introduction
Public expenditure is one of the most important tools of government interventions. Development
practitioners, donors and the general public have increasingly demanded accountability and
transparency in government expenditures. From a government perspective, information about
public spending allows governments to track and monitor the flow of public resources and their
allocation. Government data can also aid the analysis of whether efficiency improvements in the
allocation of public expenditure allocation translate into better provision of public goods. Such
knowledge can help policy makers set the right priorities for allocating public resources and for
providing a conducive environment for the private sector.
© 2015 European Association of Development Research and Training Institutes 0957-8811

European Journal of Development Research Vol. 27, 3, 353–370
www.palgrave-journals.com/ejdr/
Yu et al
Considerable work has been done to understand whether differences in the composition of
specific sectors (such as agriculture or infrastructure) can affect overall economic growth or
poverty (see Fan et al, 2008 and Mogues et al, 2015 for reviews of the effect of different types of
government expenditures in developing countries). This article used data from more than 140
countries, including both developing and industrialized countries, over the three decades from
1980 to 2010. It describes the intertemporal evolution of public spending in six sectors, including
two productive sectors (agriculture and infrastructure), two social sectors (education and health),
social protection and defence, and total government expenditures. It also compares the sector
trends by region over the three decades, followed by a closer look at each region.
However, the article does not discuss the budget process or determinants of public expenditure,
which deserve a separate study (see also Mogues et al, 2015, in this Issue). The article will also not try
to measure the efficiency and effectiveness of public resource allocation in achieving policy goals.
The article is organized as follows. The section ‘Data and measures’ provides a description of the data
source, definition, coverage and measurement. The section ‘Trends in total expenditures and its
composition’ examines the trends in, and patterns of total expenditure over time using several
indicators. Regional trends are then examined in the section ‘Evolution of the composition of regional
expenditures’. The section ‘Conclusion’ summarizes the main findings of the article.
Data and Measures
Our analysis draws on data from the Statistics on Public Expenditure for Economic Development
(SPEED) database developed and maintained by the International Food Policy Research Institute
(IFPRI, 2013). The SPEED database presents total government expenditure and its functional
breakdown of eight sectors, six of which are the most relevant to our analysis: agriculture,
transportation and communication, education, health, social security and defence. The functional
breakdown is done according to the United Nations Classification of the Functions of
Government (COFOG), outlined in the Government Finance Statistics Manual 2001 by the
International Monetary Fund (2001). There are other functions not included in the SPEED
database such as general administration, public order and culture.1 Expenditures on other
economic activities such as mining are limited and hence are not included in the discussion. The
SPEED database is focused primarily on the areas that are most important to developing
countries, and places a large emphasis on productive sectors (such as agriculture and
infrastructure), as well as sectors that contribute to the well-being of citizens (such as health,
education and social protection). However, SPEED does not include functions such as general
public services, public safety and culture, and the summation of the six sectoral expenditures in
the database will not equal the total expenditure due to the omission of these functions.
The SPEED database is compiled from various data sources of international organizations and
national agencies, including the Government Finance Statistics of the International Monetary
Fund, the World Bank and national agencies such as the Bureau of Statistics, Ministry of Finance,
Central Banks and General Accountant Offices. In a few cases we also used data from other
international and multilateral organizations. The IMF reports expenditure data at three hierarch-
ical levels: Central Budgetary Government, Central Government and General Government.
Within each of these levels, both cash and non-cash expenditures are presented. The SPEED
database consolidates cash and non-cash expenditures to measure the total expenditure actually
occurring in the country. In the majority of countries using the IMF as the source the data
presented are at the Central Budgetary Government level. The source of each data point is the
same as that documented in the SPEED user manual (IFPRI, 2013) and all numbers refer to actual
354 © 2015 European Association of Development Research and Training Institutes 0957-8811
Trends and Composition of Public Expenditure
expenditures. The database includes only expenditures directly reported by governments and
compiled by IFPRI. It is impossible to determine whether projects that are directly funded by
development partners (bilateral or multilateral) are included in the current government report
system because there is no way to trace expenditure by funding source at sector level.
Extensive and systematic checks and cross-validations were conducted to ensure data
consistency over time and across different sources. To ensure comparability across countries
and over time, the expenditures were converted from local currency into constant US dollars and
constant PPP international dollars with the base year of 2005.
The country coverage is presented in Appendix Table A1. In 2009, these countries accounted for
more than 90 per cent of the world’s GDP, of which 45 per cent came from the developing countries.
Countries in the database are divided into eight regional groups: East Asia and Pacific (EAP), Europe
and Central Asia (ECA), Latin America and the Caribbean (LAC), Middle East and North Africa
(MENA), South Asia (SA), Sub-Saharan Africa (SSA), High-Income Europe (HI Europe) and Other
High Income (Other HI). The first six groups were based on geographical location defined by the
World Bank as of 2012. Since 2013, the World Bank has changed the classification of some countries,
such as Chile, Russia and Uruguay, from middle-income countries to high-income countries. We have
adhered to the 2012 definition in this article because the sample period of 1980–2010 falls before the
change of country classification by the World Bank. The HI European countries were grouped together
because Eurostat provides information for a number of indicators (including public expenditures)
pertaining to Europe and proves to be a solid source for the region, although some European countries
are not members of the European Union or choose to use non-euro currencies. Thus, the definition of
Europe as a unit of analysis in this study is based on a combination of consistent data sources and
definition, as well as geographic proximity and economic activities. The other HI group is defined
based on the income levels outlined by the World Bank before 2012.
The SPEED database is an unbalanced panel due to limited data availability in some countries.
For instance, many countries in ECA have experienced dramatic geopolitical changes over the
last 30 years and consistent data did not exist before 1990. Regional and global averages were
weighted to account for differences in country size and coverage.2
Unlike some earlier studies that focused only on the share of sectoral public expenditure, this
study combines several relative measures (such as in per capita terms, shares of expenditures
in a given sector in total expenditures, or the ratio of expenditure to GDP) to fully reveal
the changing pattern of public spending as the economy develops and its structure evolves.
The aggregation across country is based on the same method used by other international
organizations (FAO, 2012, World Bank, 2014a, IFPRI, 2014).
Trends in Total Expenditures and Its Composition
Average per capita total expenditure was 1894 2005 PPP international dollars in the 1980s for the
countries included as a whole (top panel of Table 1). Global levels of per capita total expenditure
are informative, but mask considerable variation across regions and countries. OECD and other
developed countries overshadowed developing countries in terms of per capita total expenditure.
In the 1980s, total expenditure in high-income countries reached US$7500 per capita, about
19 times the level in developing countries.
Over the past three decades, per capita total expenditure experienced strong growth with an
annual growth rate of 1.3 per cent3 (middle panel of Table 1). This growth accelerated over time:
0.9 per cent in the 1980s, 0.6 per cent in the 1990s and 3.5 per cent in the 2000s. Growth of per
capita total expenditure has been much faster in developing economies than in developed
© 2015 European Association of Development Research and Training Institutes 0957-8811 355
Yu et al
Table 1: Total expenditure 1980–2010
1980–1989 1990–1999 2000–2010 1980–2010

Per capita total expenditure (2005 PPP)
World 1894 1969 2452 2116
Developing countries 400 533 936 633
Developed countries 7534 8382 10 041 8697
Per capita total expenditure growth rate (%)
World 0.9 0.6 3.5 1.3
Developing countries 1.4 4.1 6.8 4.2
Developed countries 1.9 0.8 2.8 1.5
Ratio of total expenditure to GDP (%)
World 30.7 27.3 26.9 28.3
Source: Authors’ calculation from SPEED (IFPRI, 2013).
countries, and the average annual growth rate was 2.7 percentage points higher in the developing
countries. Based on the whole sample, average per capita total expenditure rose steadily to $2452
in the 2000s, which was 30 per cent higher than the 1980s level. In developing countries, total
expenditure per person more than doubled from 1980 to 2000, while that of developed countries
only expanded by about 30 per cent.
As a result, differences in per capita total expenditure across income levels shrank over time,
with the ratio of per capita total expenditure between high-income and low- and middle-income
countries dropping from 16 in the 1990s to 11 in the 2000s.
Total government expenditure as a percentage of GDP measures the amount a country spends
relative to the size of its economy. This ratio has generally been lower in developing countries,
averaging around 21 per cent in the 2000s (bottom panel of Table 1). For developed countries, this
ratio hovers around 31 per cent over the same period, supporting the finding of Gwartney et al (1998)
of a high expenditure to GDP ratio in developed countries.
Sectoral Expenditure
Table 2 summarizes the composition of total spending by functional classification. Measured in

per capita terms, the top spender was social protection ($640), followed by defence ($228), health
($157) and education ($127) in the 1980s in all countries included as a whole (top panel of
Table 2). The ranking of sectoral spending did not change much in the next two decades. From
1980 to 2010, average government spending in social protection constituted more than one-third
of total resources, and was higher than the sum of agriculture, infrastructure, education and
health. Infrastructure expenditure, namely, spending on transport and communication, averaged
around $100 per person over the whole period. Per capita expenditure in agriculture was
considerably lower, at an average of $54 per person in the 2000s. Combined expenditures in
productive sectors of agriculture and infrastructure represented about 8 per cent of total
expenditure for the whole sample (middle panel of Table 2). This is far below the level of
expenditure in the social sector, comprising education and health, each of which accounted for
above 10 per cent of total public spending in the 2000s.
Table 2: Composition of government expenditure 1980–2010
World Developing Developed

countries countries
1980– 1990– 2000– 1980– 1980–2010 1980–2010

1989 1999 2010 2010
Per capita sectoral expenditure (2005 PPP dollar)
Agriculture 49 41 54 48 30 126
Transport and 106 109 102 105 34 336
communication
Education 127 186 248 189 75 689
Health 157 170 248 194 30 913
Social protection 640 638 876 723 72 3387
Defence 228 190 210 210 63 813
Share of sectoral expenditure in total expenditure (%)
Agriculture 2.6 2.1 2.2 2.3 4.7 1.5
Transport and 5.6 5.5 4.1 5.0 5.3 3.9
communication
Education 6.7 9.4 10.1 8.9 11.9 7.9
Health 8.3 8.7 10.1 9.1 4.8 10.5
Social protection 33.8 32.4 35.7 34.2 11.4 38.9
Defence 12.1 9.7 8.6 9.9 10.0 9.3
Per capita sectoral expenditure growth rate (%)
Agriculture −1.4 −0.2 5.9 0.6 2.9 −1.2
Transport and −0.8 −4.3 3.6 −0.2 1.1 1.2
communication
Education 0.5 1.6 3.8 3.1 4.5 3.1
Health 0.2 2.8 5.2 2.3 5.7 2.6
Social protection 0.2 1.3 6.5 1.6 6.7 1.8
Defence 1.5 −4.1 4.8 −0.3 2.7 −0.5
Source: Author’s calculation from SPEED (IFPRI, 2013).
Globally, the growth of expenditures in the social sector and social protection is the most
noticeable trend. On average, global per capita expenditure for education rose steadily by 3.1 per
cent per annum from 1980 to 2010, followed by health (2.3 per cent) and social protection (1.6 per
cent) (bottom panel of Table 2). The upward trend is noticeable in both developed and developing
countries particularly since the mid-1990s. Per capita spending in productive sectors such as
agriculture and infrastructure dropped in the 1980s and 1990s but recovered strongly in the 2000s.
Per capita expenditure in defence dwindled in most regions. However, defence maintains its
importance as the second largest spender, mainly due to high budget allocation to military
programmes and research in some transition economies and selected high-income countries such
as the United States.
The expenditure composition differs considerably across different income levels. More than
10 per cent of total expenditure was allocated to each of the top three spending sectors (education,
social protection and defence) in developing countries for the period from 1980 to 2010.
In developed economies social protection dominates spending on public resources; in fact 39 per
cent of total spending was dedicated to social protection.4 Average per capita social protection
expenditure was only $72 from 1980 to 2010 in developing countries, about 2 per cent of the
levels in Europe and Other HI countries (top panel of Table 2). Spending in health accounted for
about 10 per cent of total expenditure in high-income countries, which is very different from
Yu et al
Table 3: Agricultural expenditure 1980–2010
1980–1989 1990–1999 2000–2010 1980–2010

Per capita agricultural expenditure (2005 PPP dollar)
World 49 41 54 48
Developing countries 23 23 42 30
Developed countries 145 121 114 126
Share of agriculture in total expenditure (%)
World 2.6 2.2 2.3 2.4
Per capita agricultural expenditure growth rate (%)
World −1.4 −0.2 5.9 0.6
Developing countries −1.5 1.9 10.4 2.9
Developed countries −0.1 −0.8 −1.8 −1.2
Ratio of agricultural expenditure in agricultural GDP (%)
World 9.9 8.2 9.9 9.4
Source: Author’s calculation from SPEED (IFPRI, 2013).
developing countries where health was only 5 per cent of total expenditure. About 10 per cent of
total expenditure was devoted to defence in both developing and developed countries.
Rapid economic growth in some developing countries has allowed these countries to increase
their investment and spending capabilities across all sectors at impressive levels. For instance,
China has emerged prominently in the level of expenditures on agriculture, education and
defence. Other emerging economies such as Brazil, Russia, India and Mexico also played an
important role in the expenditure of certain sectors such as agriculture and defence. However, in
social protection and the infrastructure sectors (transport and communication), developed
countries in Europe and North America remained dominant players.
Average agricultural expenditure was between $41–$54 per person, representing 2–3 per cent of
total expenditure from 1980 to 2010 in all countries included (Table 3). It experienced a sharp
decrease at 1.4 per cent per annum in the 1980s, followed by a marginal decline of 0.2 per cent in the
1990s. In the most recent decade, per capita agricultural expenditure reversed the declining trend and
expanded remarkably by nearly 6 per cent per annum. Despite a surge of agricultural spending in
recent years, partly in response to global food crises, per capita expenditure in agriculture at the global
level grew slowly at an annual rate of 0.6 per cent over the three decades.
The pattern of agricultural expenditure is very different in developing countries when
compared with the high-income groups. In developed countries, agriculture represents a marginal
portion of the economy (less than 2 per cent of total expenditure), and per capita expenditure
reached $114 in the 2000s. Although agriculture constitutes a substantial part of the economy and
is the largest employer of the labor force in many developing countries, this sector only received
less than 5 per cent of total expenditure for developing countries as a whole from 1980 to 2010.
This was the equivalent of $30 per person in the same period, or less than one quarter of the
amount spent in the developed world. Per capita agricultural expenditure declined continuously
in the developed world from 1980 to 2010, but the ratio of agricultural expenditure to agricultural
GDP remained high at above 20 per cent. Developing countries exhibit a completely different
trend, in which the level of public expenditure in agriculture dropped by 1.5 per cent per year in
the 1980s, but showed signs of recovery in the 1990s and expanded quickly in the 2000s.
Figures 1a–1c compare the level, growth rate and shares of agricultural expenditure by
regions, and Figure 1d presents the ratio of agricultural expenditure to agricultural GDP.
Among developing countries, per capita agricultural expenditure grew steadily to above $50 in
East Asia and the Middle East in the 2000s. SA and SSA regions lagged behind with
expenditures in agriculture lingering below $12 per person, which was less than a quarter of
the level in East Asia (Figure 1a).
Public spending in agriculture began to decline considerably in the mid-1980s because of a
downturn in funding and a shift in policy priorities. The persistent neglect in the agricultural
sector contributed to low growth of agricultural expenditures from 1980 to 2000, leading to a
decreasing share of agricultural spending as a part of total expenditure for a large number of
countries across various income levels. In the developing regions, per capita agricultural
expenditures increased in the 2000s in response to higher food prices and economic volatility in
2007 and 2008. The highest growth rates (above 10 per cent annually) were observed in East Asia
and South Asia, and the lowest (but positive) growth rate was observed in Latin America and the
Middle East (Figure 1b). In East Asia and SA, countries have sharply enhanced their investment
in the agricultural sector, causing spikes in the expenditure share as high as 10 per cent around the
period of food crisis. The opposite growth pattern, decreasing in developed countries and increasing
in developing countries, results in a shrinking gap in per capita agricultural expenditure across
income levels, or a convergency in per capita agricultural expenditure. Agriculture only received
limited resources, as demonstrated by the declining shares of agriculture in total expenditure. Even
after elevated agricultural expenditure following high food prices in 2007–2008, the agricultural
sector's expenditure shares remained below their 1980s levels (Figure 1c).
The level of agricultural spending relative to the size of the agricultural sector, or spending
intensity, is another indicator we used to examine the intensity of investment in agriculture. This
ratio fluctuated around 8–10 per cent and just recovered to its 1980s level of 9.9 per cent in the
2000s for the countries included in the analysis. Generally agricultural spending was 20–25 per
cent of agricultural GDP in developed countries. Agricultural spending intensity was more than
10 percentage points lower in developing countries, except for the surge of agricultural spending
in the EAP in recent years, which is mainly driven by China’s increased attention to national food
security. Agricultural spending intensity also exhibits a V-shaped pattern in many regions,
suggesting a drop in interest in agriculture during most of the sample period (1980–2010) and
a subsequent quick recovery in recent years (Figure 1d).
Changes in expenditure portfolio, especially agricultural expenditure, corroborate with the
evolution of policy instruments for international development. In the 1980s and 1990s, the
Structural Adjustment Programmes (SAPs) were implemented to address macroeconomic issues
in developing countries. These programmes were designed with the policy objectives of promoting
privatization and liberalization of public sector enterprises, removing government support and
increasing market efficiency. In the agricultural sector SAPs have led to the elimination of subsidies
for agricultural inputs and other sources of help to producers. As a result, agricultural expenditure
has declined continuously since the mid-1980s. The SAPs transitioned into the Poverty Reduction
Strategy Initiatives in the early 2000s, but maintained similar policies (World Bank, 2014c).
Demographic shifts such as an ageing population and accelerated urbanization in the
developing world also affect the sectoral allocation of public resources. For example, the rapid
global expansion in social protection and health can be largely attributed to the strong support for
social welfare and health care in the developed world due to its ageing population and climbing
health care cost. Strong spending growth in education and health is also a result of the policy of
investing in human capital in the developing world, which is consistent with the evolution in the
stated priorities of the international development community (Islam, 2011).
Yu et al
a
200
150
100
50
0
EAP ECA LAC MENA SA SSA HI Europe Other HI
1980-89 1990-99 2000-10
b
15
12
9
6
3
0
-3
-6
-9
-12
1980-89 1990-99 2000-10
c
10
0
1980-89 1990-99 2000-10
d
30
25
20
15
10
0
1980-89 1990-99 2000-10
Figure 1: (a) Per capita agricultural expenditure from 1980 to 2010, 2005 PPP dollar. (b) Annual growth
rate of per capita agricultural expenditure from 1980 to 2010 (%). (c) Share of agriculture in total
expenditure from 1980 to 2010 (%). (d) Ratio of agricultural expenditure to agricultural GDP from 1980 to
2010 (%).
Note: ECA is over a shorter period, from 1995 to 2009. The number of countries varies across years, but
the use of relative measures (per capita, share, growth rate and ratio of expenditure) ensures that the
reported values reflect the different regions despite differences in country coverage.
Evolution of the Composition of Regional Expenditures
This section reviews regional variations in sectoral allocation in the eight groups according to
their geographic locations and income levels. For example, in 2010, the highest level of per capita
total expenditure in the developing world was in ECA at $3309 and the lowest level in SA at $467
(middle panel of Table 4).
Among developing countries, the EAP region experienced the most rapid growth in total
expenditures. Average per capita total expenditure rose from $198 in 1980 to $1350 in 2010,
growing at 6.5 per cent per year, largely due to robust economic development (lower panel of
Table 4). Per capita total expenditure also increased quickly in the transition economies of former
communist countries in ECA and SA, growing at 5.7 and 4.0 per cent per year in the sample
period, respectively. Although per capita total government spending increased at a much slower
pace in Latin America (1.2 per cent) and the Middle East (1.9 per cent), its absolute level
remained high at around $2500 per person in 2010.
Social protection was the single largest sector among most developed countries, and
accounted for 40–50 per cent of total expenditure in 2010 (Table 5). Social protection was also
important in developing regions, accounting for 34 per cent in LAC, 23 per cent in the MENA
and 11 per cent in EAP. The shares of education spending were near or above 10 per cent of total
expenditure in 2010 in EAP, LAC and MENA. Spending shares for defence dropped in all
developing regions, but remained above 10 per cent in ECA and SA. In most developing
countries, investments in infrastructure (transport and communication) have increased except for LAC,
Table 4: The composition of government expenditure by sector and region in 1980 and 2010

Average per capita expenditure in 1980 (2005 PPP dollars)
Total 198 — 1319 1595 122 474 9358 4417
Agriculture 21 — 95 59 8 20 159 91
Transport and communication 63 — 148 98 5 48 406 152
Education 22 — 238 257 4 33 666 302
Health 7 — 103 79 2 10 1342 170
Social protection 4 — 340 112 5 37 3749 1614
Defence 32 — 109 310 24 19 693 811
Average per capita expenditure in 2010 (2005 PPP dollars)
Total 1350 3309 2517 2492 467 502 14 442 9462
Agriculture 138 43 46 61 30 15 107 92
Transport and communication 94 132 76 242 14 30 650 259
Education 222 220 239 383 15 39 1583 495
Health 84 171 175 164 10 26 2117 972
Social protection 154 288 851 568 3 29 5655 4745
Defence 94 624 122 180 58 25 452 1739
Annual growth rate of expenditure 1980–2010 (%)
Total 6.5 5.7 1.2 1.9 4.0 0.3 1.1 1.9
Agriculture 5.6 4.9 −1.9 1.3 2.8 −1.0 −1.4 −0.7
Transport and communication 1.2 9.3 −2.9 2.1 2.2 1.2 1.3 1.3
Education 7.6 6.7 1.2 1.7 4.9 1.7 3.3 1.7
Health 7.7 7.9 3.4 2.8 4.0 3.4 1.4 5.6
Social protection 14.9 11.8 3.8 5.4 −0.5 1.7 1.0 2.7
Defence 4.0 15.0 0.0 −0.7 2.1 0.3 −2.5 0.7
Note: ECA is over a shorter period, from 1995–2009.
Source: SPEED (IFPRI, 2013).
Yu et al
Table 5: The share of government expenditure by sector and region in 1980 and 2010

Average share in total expenditure in 1980 (2005 PPP dollars)
Total 100 — 100 100 100 100 100 100
Agriculture 11 — 7 4 7 4 2 2
Transport and communication 32 — 11 6 4 10 4 3
Education 11 — 18 16 3 7 7 7
Health 4 — 8 5 2 2 14 4
Social protection 2 — 26 7 4 8 40 37
Defence 16 — 8 19 19 4 7 18
Average share in total expenditure in 2010 (2005 PPP dollars)
Total 100 100 100 100 100 100 100 100
Agriculture 10 1 2 2 6 3 1 1
Transport and communication 7 4 3 10 3 6 5 3
Education 16 7 9 15 3 8 11 5
Health 6 5 7 7 2 5 15 10
Social protection 11 9 34 23 1 6 39 50
Defence 7 19 5 7 13 5 3 18
Note: ECA is over a shorter period of 1995–2009.
Source: SPEED (IFPRI, 2013).
even though the sectoral shares have been declining in some other regions such as EAP, LAC,
SA and SSA.
Next, we will present an overview of spending patterns by region by looking at the evolution
of the shares of sectoral expenditures in total expenditures and in GDP. The analysis examines
not only the regional patterns of resource allocation, but also how countries within each region
invested their resources to attain development goals, and in particular looks at spending on
agricultural development.
East-Asia and Pacific
The East-Asia and Pacific region is home to 13 countries. The region has witnessed consistent
growth in expenditures of every sector over time, especially social services and social protection
(Figure 2a). Between 1980 and 2010, per capita spending in education, health and social
protection increased substantially by more than 7 per cent per annum (Table 4). Per capita
spending in agriculture also observed a high growth rate (5.6 per cent) but not in the spending of
transport or communication (only 1.2 per cent). In 2010, the top spending sectors were education,
social protection and agriculture, each representing more than 10 per cent of total expenditure
(Table 5).
The accelerated growth in the region is in large part influenced by the presence of China, which
is by far the largest spender. In agriculture alone, China accounted for 92 per cent of total
agricultural expenditures in the region in 2010. The amount spent on agriculture relative to GDP
and total expenditures generally decreased in earlier years and then swung upwards in recent years,
revealing governments’ increased attention to the agricultural sector for food security after being
hit by high food prices. While much of the growth in expenditures in social protection and
transport and communications can be attributed to China, other countries such as Thailand,
Vietnam and Singapore have also observed positive growth rates of spending in these two sectors.
a
150
100
50
0
Agriculture Infrastructure Education Health Social Protection Defense
1980-89 1990-99 2000-10
b
50
40
30
20
10
0
1980-89 1990-99 2000-10
c
400
300
200
100
0
1980-89 1990-99 2000-10
d
400
300
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100
0
1980-89 1990-99 2000-10
e
600
500
400
300
200
100
0
1980-89 1990-99 2000-10
f
50
40
30
20
10
0
1980-89 1990-99 2000-10
Figure 2: (a) Per capita expenditure in EAP, 2005 PPP dollar. (b) Per capita expenditure in SA, 2005 PPP
dollar. (c) Per capita expenditure in Middle East and North Africa, 2005 PPP dollar. (d) Per capita
expenditure in ECA, 2005 PPP dollar. (e) Per capita expenditure in LAC, 2005 PPP dollar. (f) Per capita
expenditure in SSA, 2005 PPP dollar.
Note: ECA is over a shorter period of 1995–2009. Country coverage varies over time.
Yu et al
Spending trends vary considerably across countries in the region, but the relative measures of
spending in productive sectors have generally converged, that is, fallen into smaller ranges, which
suggests that on average countries have become more similar when measured by the specific
measures like per capita or shares (graphs not included). The sectoral shares of spending in total
expenditures and per capita expenditure clustered within smaller ranges over time for countries in
the EAP region. In other words, the sectoral expenditure becomes more equal when measured in
relative terms, although countries differ in terms of size and wealth. In contrast, the shares of
spending on education, health and social protection exhibit a dispersing or less equalizing pattern,
which indicates that countries in this region have diverged, or increased their dissimilarities by
assigning different priorities to social development.
South Asia
The SA sample includes eight countries and the region reported average per capita total spending
of $467 in 2010. The largest volume of resources was devoted to building up defence, averaging
$58 and accounting for 13 per cent of total expenditure in 2010 (Tables 4 and 5). The fastest
growing sector in the region over the period from 1980 to 2010 was human capital (education and
health), with growth rates averaging above 4 percent per year. Investment in agriculture rose
substantially in the 2000s but social protection dropped marginally (Figure 2b).
Patterns of growth within the region, like in the EAP region, have been dominated by a single
large player, India. India alone represented 85 per cent of the region’s total expenditure in 2010.
Per capita agricultural spending grew at a relatively fast rate in the region from 1980 to 2010
(5.9 per cent per year), driven by fast growers such as Pakistan, Bangladesh and India.
Relative shares of agriculture and transport and communication in total expenditures and GDP
have declined for most countries, leading to a clustering of countries with low expenditure shares
of the productive sector (graph not included). On the other hand, the share and per capita
expenditure in social spending (education, health and social protection) generally dispersed over
time as indicated by the widening range of values observed in these indicators over time. This
pattern is similar to that of the EAP region and suggests a divergence in social spending and a
convergence in productive spending. The level of per capita social protection is very low in SA
compared with other regions, partly due to the lack of a wide social safety net and the presence of
a large unorganized labour force (Jha and Bhattacharyya, 2010).
Middle East and North Africa
The MENA region includes 16 countries. On average the governments in the region spent $2492
per capita in 2010 (Table 4). A considerable part of the resources was spent on education, social
protection and defence in the 2000s (Figure 2c and Table 5). The high volume of spending in
these sectors does not fully overlap with significant growth rates in these sectors between 1980
and 2010, and growth rate of more than 2 per cent was observed for social protection, health and
infrastructure.
Similar to other regions, the shares of expenditures in agriculture, transport and communica-
tion, and defence converged over time but at a lower level. For agriculture the range of shares in
total expenditures diminished from 1–15 per cent in 1980 to 1–6 per cent in 2010, reflecting
decreased agricultural spending in the region. Spending gaps among education, health and social
protection among countries in the MENA region have widened over time due to differences in
national spending priorities and resources availability across countries.
Europe and Central Asia
The 14 countries in the ECA region collectively spent more than $900 billion in 2010, or $3309
in per capita terms. Most countries experienced drastic political changes, either transitioning from
a communist regime or gaining independence in the early 1990s, and hence the data reported for
this region are for a shorter period, that of 1995 to 2010. This region features a significant amount
of resources being allocated to defence, with almost one-fifth of total expenditure dedicated to
defence and military spending (Table 5). From 1995 to 2010, all sectors exhibited high-speed
growth to recover from the sudden drop in economic performance in the early 1990s (Figure 2d).
The highest growth was found in defence and the lowest in agriculture (Table 4). This has
led to a decrease in the shares of agricultural spending in relation to both agricultural GDP and
total expenditures. This expansion in expenditures has translated into a quick convergence
in the expenditure shares of all sectors except for social protection, as social protection spending
relative to total spending appears more dispersed among countries in recent years than in the
earlier years.
Latin America and the Caribbean
Twenty-three countries are located in the LAC region, which collectively spent $1.2 trillion in
2010, or $2517 per person. The biggest source of expenditures in the region over the three
decades was social protection, or 22 per cent of total expenditure, which is the highest allocation
among developing economies (Table 5). For example, the Brazilian government spent nearly 50
per cent of its total expenditure on social protection in 2009 (SPEED (IFPRI, 2013)). A
significant proportion of public resources was apportioned to education and health, with sectoral
expenditure share reaching 13.6 and 7.3 per cent in 1980–2010, respectively (Figure 2e).
The expansion of social service and social protection spending in the region has been accompanied
by a contraction of expenditures in productive sectors. Agriculture receives low priority in the region,
accounting for a small portion of total expenditure (less than 3 per cent). The level of agricultural
spending declined rapidly, and per capita agriculture expenditure more than halved from $95 in the
1980s to $46 in the 2000s, dropping by 2 per cent per year (Table 4). The striking fact about transport
and communication in the region is the fast decrease in per capita infrastructure expenditure: it
accounted for 4.5 per cent of total expenditure but fell at an alarming annual rate of 3 per cent.
Agricultural spending in relative terms (shares to total expenses) converged rapidly across
countries and clustered around the 0–5 per cent range from 2005 to 2010. A similar but less
intense clustering is observed for sectoral expenditure shares of transport and communication,
health, and defence. Instead of witnessing a clustering of social protection spending, however,
countries have reported marked variation in the level and share of such spending, partially due to
the massive expenditure in poverty reduction programmes observed in Brazil, Argentina and
Chile. A divergence is also observed in the expenditure level and share of education.
Sub-Saharan Africa
The SPEED database contains 39 SSA nations, and average per capita total expenditure was $502
in 2010 (Figure 2f). The region displays a relatively balanced distribution of spending across
sectors. Partly supported by the inflow of international aid in the form of budget support,
government expenditure was slanted towards education and defence (high share in total
expenditure), but fast growth occurred mainly in education, health and social protection for
vulnerable groups (expanding at above 1.5 per cent annually) (Table 4).
Yu et al
SSA invested a mere $15 per capita in agriculture from 1980 to 2010, accounting for about 3.4
per cent of total expenditure. This actual share is far below the governments’ commitment to
dedicate 10 per cent of their budgets to agriculture (African Union, 2003), or the resource
allocated in any developing region (Table 3). In the 2000s, only two regions, East Asia and the
Middle East, were able to raise their agricultural spending share to above 10 per cent in response
to elevated food prices since the mid-2000s. A major agricultural spender, China, has cut down its
sectoral spending share of agriculture in recent years. As pointed out by Benin and Yu (2013),
most SSA countries did not achieve the 10 per cent target, and only seven countries were able to
consistently surpass the target in most years. Even countries with high agricultural expenditure
shares, such as Burkina Faso and Niger, have been cutting down public spending on agriculture,
possibly due to low or below-optimal returns on agricultural expenditure.
Growth rates of agriculture expenditure within countries in the region varied considerably,
from nearly 20 per cent reduction per year in Burundi to over 20 per cent annual growth in
Rwanda. This growth has led to a clustering of countries in terms of the percentage of agricultural
spending as a share of total spending. Although the range among countries of the shares of
agriculture as a part of total expenditure has decreased recently, the convergence of the
expenditure shares or per capita agriculture expenditure is not as pronounced in other developing
regions, highlighting the high degree of heterogeneity in the region.
HI Europe
The HI Europe group consists of 27 countries, which on average spent $11700 per person from
1980 to 2010. Countries in this group are either part of the European Union or economies heavily
associated with it. Social protection expenditures have been the largest expenditure item in the
region, receiving nearly 40 per cent of total expenditure, with sectoral expenditure above $4500
per person over the sample period. Human capital investment, such as education and health, are
also top expenditure items, each accounting for nearly or more than 10 per cent of total
expenditure (Table 4).
The growth rates of sectoral spending are modest in many sectors, which translated into a
convergence of spending shares in almost all sectors in the region. The exceptions are agriculture
and defence expenditure for which the levels of expenditure decreased over time. Per capita
defence expenditure dropped by more than 40 per cent over the three decades at an annual rate of
2.5 per cent. The per capita spending in agriculture in HI Europe as a whole declined at a rate of
−1.4 per cent per year from 1980 to 2010, resulting in a tightening band in the share of agricultural
spending as a part of total spending. In 1980, countries in the region spent between 0.5 and 15 per
cent of total expenditures on agriculture. In 2010, the range reduced to 1–5 per cent.
Other High Income
Seven countries fall in the high-income group, which spent $6000 per person during the period
from 1980 to 2010. Similar to the European countries, social protection together with education
and health dominates the landscape of government spending and accounts for more than half of
total spending (Table 4). Defence spending is also very high, partly due to the high level of
military R&D in the United States.
Agricultural expenditures in the region actually decreased on average by −0.7 per cent from
1980 to 2010, despite the accelerated growth observed by South Korea. The drop in funds
dedicated to agriculture led to a convergence of agricultural spending share across countries in
this group. Similar convergence is observed for several other sectors including transport and
communication, education, and defence.
In contrast to the declining share of agricultural expenditure is the massive increase in social
protection spending, which reached nearly $2500 per capita for the group over the three decades.
The United States reported the highest share of social protection in total expenditure for the entire
period. But other countries such as Korea and Japan have progressively increased their shares of
social protection in total expenditure, which has resulted in the shares of social protections
expenditures as a part of total expenditures congregating around 20–30 per cent for most countries.
The surge in expenditures for social protection, along with the expansion of health spending,
suggests that governments have to allocate more resources to provide medical services and social
security to accomodate an ageing population and to provide improved health-care services.
Conclusion
Through an analysis of trends of government spending from 1980 to 2010, the article draws the
following conclusion. First, governments have increased their total level of spending since 1980,
and per capita total expenditure in developed countries was much higher than in developing
countries. The size of government spending relative to the economy, or spending intensity, is also
higher in developed countries than in the developing world. The growth in per capita total
expenditure in developed countries was modest in the 2000s due to those countries’ high initial
levels of expenditure. On the other hand, developing countries are catching up and have
accelerated their growth in per capita total expenditure, mainly because of increased public
expenditure in developing Asia. As a result, the difference in per capita total expenditure between
high- and low-income countries decreased over time.
Second, the diversity in resource allocation in different regions reflects differences in levels of
economic performance, demographic shift and development priorities. Developing countries on
average channelled more funds to education, social protection and defence, while social protection
dominates public resources in developed economies. Social protection has increased substantially in
both developing and developed countries, and it accounted for more than one-third of total expenditure
in industrialized economies. The growth of expenditures in social services such as health and
education outpaced that of productive sectors including agriculture and infrastructure in many regions.
Third, despite their essential role in promoting development and equality, expenditures in
productive sectors such as infrastructure and agriculture still represented a small fraction of total
public funds. Average spending on infrastructure and agriculture was $100 and $50, respectively,
together representing only 8 per cent of total expenditure from 1980 to 2010 globally. In addition,
the growth in per capita expenditure in productive sectors lagged behind social sectors in most
regions. Public spending in agriculture in developing countries began to decline considerably in the
1980s and 1990s due to persistent neglect of the agricultural sector. In the new millennium, the
strategic role of agriculture in development and poverty reduction brought back substantial support
for agriculture in the developing world. However, agricultural spending had been declining
continuously in high-income countries, which has led to a convergence in agricultural and
infrastructural spending across the world, measured in terms of per capita and share in total spending.
Notes
1. COFOG splits total government expenditure data into 10 functional groups or sub-sectors of
expenditures: (i) general public services, (ii) defence, (iii) public order and safety, (iv) economic
affairs, (v) environmental protection, (vi) housing and community amenities, (vii) health, (viii)
Yu et al
recreation, culture and religion, (ix) education and (x) social protection. Within economic affairs, there
are sub-groups including (i) general economic, commercial and labour affairs, (ii) agriculture, forestry,
fishing and hunting, (iii) fuel and energy, (iv) mining, manufacturing and construction, (v) transport, (vi)
communication, (vii) other industries, (viii) R&D economic affairs and (ix) other. Within economic
affairs, most countries only report consistently expenditures in agriculture, transport and
communication, but not other sub-groups.
2. It would be ideal to distinguish subsidies and investment/research expenditures for a thorough
understanding of within-sector allocation. According to the COFOG definition, subsidy is part of the
economic classification while research and development falls under the functional classification. A
cross-classification of expenditures is a challenging task for researchers and SPEED has not compiled
this type of information from international and national sources.
3. The least square growth rates were used to estimate growth rates by regressing the levels of expenditures
in natural logarithms against the time trend. Subsequently, the coefficient of the time period is
exponentiated, subtracted by 1 and multiplied by 100. This method is less sensitive to outliers at the
starting and ending year because it takes into account all the observations and gives more robust results
than the geometric growth method (World Bank, 2014b). The aggregates are weighted over population
to avoid skewness (distortion) caused by any large economies or country coverage.
4. According to COFOG, social protection expenditures include sickness and disability, old age, survivors,
family and children, unemployment, housing, social exclusion not elsewhere classified, R&D social
protection, and social protection not elsewhere classified.
References
African Union (2003) Declaration on Agriculture and Food Security in Africa. Assembly/AU/Decl.4-11 (II)
Addis Ababa, Ethiopia: African Union.
Benin, S. and Yu, B. (2013) Complying with the Maputo Declaration Target: Trends in Public Agricultural
Expenditures and Implications for Pursuit of Optimal Allocation of Public Agricultural Spending.
ReSAKSS Annual Trends and Outlook Report 2012. Washington DC: International Food Policy
Research Institute.
Fan, S., Yu, B. and Saurkar, A. (2008) Public spending in developing countries: Trends, determination, and
impact. In: S. Fan (ed.) Public Expenditures, Growth, and Poverty. Baltimore, MD: Johns Hopkins
University Press, pp. 20–55.
FAO (2012) The State of Food and Agriculture: Investing in Agricultural for a Better Future. Rome, Italy:
Food and Agriculture Organization of the United Nations.
Gwartney, J., Holcombe, R. and Lawson, R. (1998) The scope of government and the wealth of nations.
Cato Journal 18(2): 163–190.
IMF (2001) Government Finance Statistics Manual 2001. Washington DC: International Monetary Fund.
IFPRI (2013) The Statistics on Public Expenditure for Economic Development (SPEED). Washington DC:
International Food Policy Research Institute.
IFPRI (2014) Global Food Policy Report 2014. Washington DC: International Food Policy Research
Institute.
Islam, N. (2011) Foreign Aid to Agriculture: Review of Facts and Analysis. Discussion Paper 01053.
Washington DC: International Food Policy Research Institute.
Jha, R.K. and Bhattacharyya, S. (2010) Social Security System in India: An International Comparative
Analysis. MPRA (Munich Personal RePEc Archive) Paper No. 20142, http://mpra.ub.uni-muenchen.de/
20142/1/MPRA_paper_20142.pdf.
Mogues, F., Fan, S. and Benin, D. (2015) Public Investments in and for Agriculture. European Journal of
Development Research, 27(3): 337–352.
World Bank (2014a) What methods are used to calculate aggregates for groups of countries? https://
datahelpdesk.worldbank.org/knowledgebase/articles/198549-what-methods-are-used-to-calculate-
aggregates-for, accessed 3 December 2014.
World Bank (2014b) Methodologies, http://data.worldbank.org/about/data-overview/methodologies,
accessed 3 December 2014.
World Bank (2014c) Structural adjustment programs, http://www.worldbank.org/development/sap.html,
accessed 4 December 2014.
Appendix
Table A1: Coverage of countries in the SPEED database

© 2015 European Association of Development Research and Training Institutes 0957-8811
China Albania Argentina Algeria Afghanistan Angola Austria Australia

Fiji Azerbaijan Bahamas Bahrain Bangladesh Benin Belgium Canada
Indonesia Belarus Barbados Egypt Bhutan Botswana Cyprus Croatia

Malaysia Bulgaria Belize Iran India Burkina Faso Czech Republic Israel
Mongolia Georgia Bolivia Jordan Maldives Burundi Denmark Japan
Myanmar Kazakhstan Brazil Kuwait Nepal Cameroon Estonia New Zealand
Papua New Guinea Kyrgyzstan Chile Lebanon Pakistan Cape Verde Finland Rep. Korea
Philippines Latvia Colombia Morocco Sri Lanka Central Afr. Rep. France The United States
Singapore Lithuania Costa Rica Occupied Palestinian Territory Rep. Congo Germany

Thailand Moldova Dominican Republic Oman Côte d’Ivoire Greece
Tonga Romania Ecuador Qatar Dem. Rep. Congo Hungary
Vanuatu Russia El Salvador Syria Equatorial Guinea Iceland
Vietnam Serbia Grenada Tunisia Ethiopia Ireland
Ukraine Guatemala Turkey Gambia Italy
Jamaica United Arab Emirates Ghana Luxembourg
Mexico Yemen Guinea-Bissau Malta
Panama Kenya The Netherlands
Paraguay Lesotho Norway
Peru Liberia Poland
Saint Vincent and the Grenadines Madagascar Portugal
Trinidad and Tobago Malawi Slovakia
Uruguay Mali Slovenia
Venezuela Mauritius Spain
Mozambique Sweden
Namibia Switzerland
Niger The United Kingdom
Nigeria
Rwanda
Senegal
Seychelles
369
Yu et al
Other HI
HI Europe
South Africa
Sierra Leone
Zimbabwe
Swaziland
Tanzania
Uganda
Zambia
Sudan
Togo
SSA
SA
MENA
LAC
ECA
Table A1 continued
Source: IFPRI (2013).

EAP
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Trends and Composition of Public Expenditures: A Global and Regional

Article in European Journal of Development Research · July 2015

Bingxin Yu Shenggen Fan

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European Journal of Development Research (2015) 27, 353–370. doi:10.1057/ejdr.2015.26

© 2015 European Association of Development Research and Training Institutes 0957-8811

Data and Measures

Trends in Total Expenditures and Its Composition

Table 1: Total expenditure 1980–2010

1980–1989 1990–1999 2000–2010 1980–2010

Table 2 summarizes the composition of total spending by functional classiﬁcation. Measured in

Table 2: Composition of government expenditure 1980–2010

World Developing Developed

1980– 1990– 2000– 1980– 1980–2010 1980–2010

Table 3: Agricultural expenditure 1980–2010

1980–1989 1990–1999 2000–2010 1980–2010

1980-89 1990-99 2000-10

1980-89 1990-99 2000-10

1980-89 1990-99 2000-10

1980-89 1990-99 2000-10

Evolution of the Composition of Regional Expenditures

EAP ECA LAC MENA SA SSA HI Europe Other HI

EAP ECA LAC MENA SA SSA HI Europe Other HI

East-Asia and Paciﬁc

1980-89 1990-99 2000-10

Middle East and North Africa

Europe and Central Asia

Latin America and the Caribbean

Other High Income

Table A1: Coverage of countries in the SPEED database

EAP ECA LAC MENA SA SSA HI Europe Other HI

China Albania Argentina Algeria Afghanistan Angola Austria Australia

Indonesia Belarus Barbados Egypt Bhutan Botswana Cyprus Croatia

Trends and Composition of Public Expenditure

Source: IFPRI (2013).

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