Impact of Government Consumption and Investment Expenditures on Human Development Index Using Generalized Method of Moment

Development is a main goal for governments. The development process is influenced by several factors. Countries at different stages of development have different cost structures. This study aimed to determine the impact of government consumption and investment expenditures on human development index (HDI). This was an analytic- retrospective study. Based on available data، we included the data of 119 countries from 2000 to 2006. We used a checklist to collect data from valid international websites. Using Eviews software، the regressions were estimated by generalized method of moments (GMM). To confirm the results، we used the Sargan and Wald tests. Initial levels of development showed positive relationship between government expenditures and the HDI. In more than certain levels (optimum level)، there was negative relationship between the government consumption expenditures with the HDI. This finding was contrary in countries with low GDP per-capita. Elasticity of consumer expenditures to the HDI for both groups of countries with high and low GDP per-capita was higher than investment expenditures. In the early stages of development، increasing consumer expenditures result in improving the HDI. However، in the late stages of development، countries need to invest in the infrastructure to change their HDI rank.