The Effectiveness of Public Spending on Education and Health Care in Brazilian Economy

The present study endeavors to examine the role of government spending on the education and health sectors with regard to promoting the gross domestic product (GDP) of Brazil over the last three decades. Johansen cointegration test confirmed the existence of cointegrating relation. The causal impact of education and health care spending on GDP was further examined in the study. Results of the estimated models showed that public spending on education and public spending on health-care have not been able to exert any impact on GDP. On the contrary, it is found that one period lagged GDP slowed down the government spending on health-care. The variance decomposition analysis indicates that in Brazil education spending and health care spending may contribute just about 8.5% and 6% respectively in constituting a GDP growth profile in the coming future. Therefore, it is found that Brazil’s fiscal system has a relatively low impact on the distribution of income as far as public spending on education and health-care are concerned.