The Role of Fiscal Policy in Human Development: The Pakistan’s Perspective

Economic and human development is the ultimate goal of every government. The objective of this study is to investigate the role of fiscal policy in the human development of the country. The novelty of this study is that here we directly measure the effect of government expenditures on Human development by using Human Development Index. This study employs the autoregressive distributed lags (ARDL) bounds testing approach of cointergration on different macroeconomic variables for Pakistan from 1972 to 2010 to explore the impact of government expenditure and the political regime on the welfare of the people in the country. The results show that increase in per capita income and education expenditure have positive effect and current expenditure has negative impact on the human development. The political regime of the democratic governments has a negative effect on human development. The alarming condition of negative relation of current expenditure needs attention of the policy-makers for reducing corruption in the public spending to gain the maximum benefits for the human welfare in Pakistan.