Fiscal expenditures, revenues and labour productivity in South Africa

Figures & data

Figure 1. Government revenue components and labour productivity.

Figure 2. Government revenue components and labour productivity.

Table 1. Description of time series

Code	Variables	Regression symbol
Main dependent variable
KBP7014	Labour productivity	Lg(Y/L)
Expenditure variables
KBP4373	Consolidated Government expenditure on education	Lgedu
KBP4371	Consolidated Government expenditure on defense	Lgdef
KBP4374	Consolidated Government expenditure on health	Lghlth
KBP4376	Consolidated Government expenditure on housing	Lghsng
KBP4375	Consolidated Government Expenditure on Social protection	Lgsoc_proc
KBP4372	Consolidated Government expenditure on Public safety and order	Lgp_saf
KBP4377	Consolidated Government expenditure on recreation, culture and religion	Lgrec
Revenue variables
KBP4594	National Government tax revenue: SACU Payments	Lgsacu
KBP4578	Government tax revenue: VAT	Lgvat
KBP4577F	Property Tax	Lgprop_tax
KBP4579F	Fuel levies	Lgfuel_tax
KBP4590F	Tax on international trade: import duties	Lgtrade tax
KBP4570F	Income tax	LgIncome tax
Control variables
KBP6275Y	Capital labour ratio	Lg(K/L)
KBP7173X	Consumer price inflation	Lgπ
KBP5395J	Real effective exchange rate	LgREER

Table 2. Descriptive statistics and correlation matrix

Panel A: Descriptive statistics
Variables	Mean	Median	Max	Min	Std Dev	Skewness	Kurtosis	Jarque-Bera	Probability
Lg(Y/P)	1.923940	1.960946	2.055378	1.729974.	0.113319	−0.476416	1.814200	2.796093	0.247079
Lgedu	4.941314	4.936815	5.556591	4.187746	0.409501	−0.104750	1.824043	1.724008	0.422315
Lgdef	4.329459	4.357249	4.673693	4.024978	0.243493	0.045648	1.395016	3.122705	0.209852
Lghlth	4.662500	4.643077	5.337158	3.889526	0.452312	−0.038149	1.692562	2.072553	0.354773
Lghsng	4.222912	4.217484	4.853820	3.583652	0.462720	0.111176	1.387448	3.201800	0.201715
Lgrec	3.947047	3.930491	4.617765	3.049606	0.534494	−0.100275	1.507432	2.740474	0.254047
Lgsoc_pro	4.718010	4.787354	5.410657	3.737193	0.497843	−0.300642	1.897241	1.906292	0.385526
Lgvat	4.914643	4.991926	5.511571	4.224818	0.431770	−0.185952	1.631078	2.431482	0.296490
Lgsacu	4.064211	4.124765	4.747808	3.135451	0.496966	−0.179678	1.732047	2.098684	0.350168
LgInc_tax	5.241502	5.259508	5.847652	4.531377	0.425487	−0.143175	1.649018	2.304471	0.315930
Lgprop_tax	3.707343	3.893040	4.219715	3.014521	0.400436	−0.423761	1.776100	2.677937	0.262116
Lgtrade tax	4.146930	4.110186	4.748785	3.629308	0.394624	0.138569	1.412718	3.137160	0.208341
Lgfuel_tax	4.273831	4.271563	4.881847	3.610767	0.364637	−0.073000	2.098703	1.007329	0.604312
Log(K/L)	4.658270	4.627745	5.167533	4.165541	0.367985	0.068858	1.416557	3.052562	0.217342
Logπ	0.817900	0.790285	1.184975	0.313867	0.190213	−0.207876	3.510678	0.523984	0.769517
LogER	2.830975	2.860524	3.167577	2.412914	0.224136	−0.342152	2.146058	1.446967	0.485060
Panel B: Correlation matrix
Variables	LgDef	LgEdu	LgExch	LgHlth	LgHsng	Lginfl	LgInv	LgLp	Lgnet_tax	Lgsacu	Lgrec	LgSoc_proc	Lgvat
LgDef	1.00
LgEdu	0.37	1.00
LgER	−0.08	−0.37	1.00
LgHlth	−0.91	−0.07	0.68	1.00
LgHsng	0.67	−0.39	0.34	0.70	1.00
Lgπ	0.11	0.25	−0.08	0.08	0.22	1.00
Lg(K/L)	−0.93	−0.55	0.82	0.81	0.73	−0.13	1.00
Lg(Y/P)	−0.90	−0.55	0.85	0.77	0.59	−0.26	0.96	1.00
LgPsaf	−0.72	−0.42	0.62	0.69	0.49	−0.14	0.77	0.84	0.80	1.00
LgRec	−0.80	−0.52	0.53	0.75	0.82	−0.06	0.87	0.82	0.86	0.80	1.00
Lgsacu	−0.92	−0.60	0.84	0.78	0.69	−0.14	0.98	0.96	0.98	0.77	0.85
LgSoc_proc	−0.67	−078	0.61	0.47	0.39	−0.44	0.77	0.82	0.80	0.74	0.68	1.00
LgVat	−0.92	−0.58	0.82	0.79	0.68	−0.22	0.99	0.98	0.99	0.79	0.86	0.81	1.00

Note: Correlation matrix amongst variables. All variables are in logarithm form.

Table 3. Unit root test results

Time series	ADF		PP
	Level	1^st difference	Level	1^st difference
Lg(Y/L)	−1.39	−4.88***	−1.44	−4.88***
Lgedu	−1.31	−4.06***	−2.24	−4.02***
Lgdef	−0.01	−5.81***	0.03	−5.81***
Lghlth	−1.57	−4.05***	−1.43	−4.04***
Lghsng	−0.34	−5.94***	−0.31	−5.91***
Lgrec	−1.30	−6.19***	−1.35	−6.14***
Lgp_saf	−4.52***	−3.99***	−3.65**	−4.02***
Lgsoc_proc	−2.06	−6.57***	−3.13***	−7.07***
Lgvat	−1.57	−2.38***	−1.77	−2.65***
Lgsacu	−1.59	−3.30***	−1.22	−3.67***
Lginc_tax	−1.57	−3.69***	−2.01	−3.46**
Lgprop_tax	−1.56	−3.74***	−1.56	−3.72***
lgFuel_levy	−1.55	−4.00***	−0.86	−4.08***
LogInt_tax	−0.25	−4.05***	−0.72	−4.97***

Note: ***, **, * represents 1%, 5% and 10% respectively.

Table 4. Bounds test for cointegration

PANEL A (Government expenditure)
Variables	F-statistics	Decision
Lgedu	4.74	Co-integrated at all levels
Lgdef	4.23	Co-integrated at 5% level
Lghlth	12.58	Co-integrated at all levels
Lghsng	4.14	Co-integrated at 5%
Lgp_saf	4.83	Co-integrated all levels
Lgsoc_proc	12.5	Co-integrated at all levels
Lgrec	5.33	Co-integrated at all levels
PANEL B (Government revenue)
Lgvat	10.2	Co-integrated at all levels
Lgs_pay	5.8	Co-integrated at all levels
LgInc_tax	13.8	Co-integrated at all levels
Lgprop_tax	4.6	Co-integrated at all levels
Lgfuel_tax	7.2	Co-integrated at all levels
lgInt_tax	7.5	Co-integrated at all levels

Table 5. Government expenditure items and labour productivity

	(1)	(2)	(3)	(4)	(5)	(6)	(7)
Panel A: Long-run estimates
Logedu	0.53 (0.08)*
Logdef		−0.15 (0.84)
Loghlth			0.53 (0.02)***
Loghsng				−3.37 (0.72)
Logrec					0.32 (0.04)***
Logp_saf						0.32 (0.00)***
Logsoc_proc							0.20 (0.21)
Loginfl	−0.22 (0.02)***	−0.22 (0.21)	−0.06 (0.38)	−0.13 (0.09)*	−0.20 (0.03)***	−0.06 (0.26)	−0.05 (0.42)
Loginv	−0.42 (0.14)	0.23 (0.69)	−0.49 (0.05)***	0.13 (0.24)	−0.35 (0.13)	−0.17 (0.05)***	−0.10 (0.55)
Logexch	0.11 (0.32)	0.09 (0.58)	0.16 (0.04)***	0.21 (0.03)***	0.14 (0.06)***	0.14 (0.00)***	0.06 (0.46)
Panel A: Short-run estimates
Δlg(Y/L)(−1)	− 0.64 (0.00)***	−0.30 (0.20***	−1.05 (0.00)***	0.60 (0.00)***	−0.69 (0.00)***	0.62 (0.00)***	−0.47 (0.00)***
Δlgedu	0.31 (0.00)***
Δlgdef		0.04 (0.50)
Δlghlth			0.38 (0.00)***
Δlghsng				−9.70 (0.32)
Δlgrec					−0.00 (0.83)
Δlgp_saf						0.53 (0.00)***
Δlgsoc_proc							−0.02 (0.29)
Δlgπ	0.00 (0.82)	−0.04 (0.06)**	0.04 (0.00)***	−0.03 (0.06)**	0.00 (0.87)	0.00 (0.55)	−0.00 (0.98)
Δlg(K/L)	0.03 (0.51)	0.18 (0.04)***	0.11 (0.01)***	0.17 (0.01)***	−0.06 (0.33)	0.02 (0.44)	0.11 (0.03)***
ΔlgER	0.06 (0.04)***	0.06 (0.23)	0.04 (0.06)**	0.09 (0.04)***	−0.01 (0.75)	0.13 (0.00)***	0.05 (0.14)
ECT(−1)	−0.50 (0.00)***	−0.03 (0.00)***	−0.47 (0.00)***	−0.03 (0.00)***	−0.40 (0.00)***	−1.15 (0.00)***	−0.36 (0.00)***

Note: ***, **, * represents 1%, 5% and 10% respectively. P-values are reported in parentheses.

Table 6. Government expenditure items and labour productivity

	(1)	(2)	(3)	(4)	(5)	(6)
Panel A: Long-run estimates
Lgvat	0.53 (0.00)***
Lgsacu		0.28 (0.80)
Lginc_tax			0.42 (0.00)***
Lgfuel tax				0.20 (0.34)
LgInt_tax					−0.34 (0.24)
Lgprop_tax						−0.01 (0.70)
Lg(K/L)	−0.36 (0.00)***	−0.46 (0.79)***	−0.21 (0.00)	−0.00 (0.98)	0.40 (0.26)	0.13 (0.00)***
Lgπ	−0.02 (0.22)	0.48 (0.79)***	−0.04 (0.06)	−0.25 (0.02)	−0.01 (0.94)	−0,16 (0.00)***
LgER	5.02 (0.98)	0.44 (0.63)***	−0.00 (0.91)	−0.00 (0.98)	0.30 (0.06)	0.20 (0.00)***
Panel B: Short-run
Δlg(Y/L) (−1)	−0.28 (0.01)***	−0.55 (0.00)***	−0.10 (0.50)	−0.44 (0.00)***	−0.53 (0.00)***	0.34 (0.02)
Δlgnet_tax
Δlgvat	−0.08 (0.02)***
Δlgsacu		−0.01 (0.62)***
ΔLgInc_tax			−0.22 (0.00)***
ΔLgfuel_tax				0.09 (0.25)
ΔlgInt_tax					0.08 (0.04)
ΔLogprop_tax						−0.08 (0.04)***
ΔLog(K/L)	0.14 (0.00)***	0.23 (0.00)***	0.13 (0.00)***	0.07 (0.16)	0.08 (0.20)	0.27 (0.00)***
ΔLogπ	0.00 (0.92)	0.00 (0.56)	−0.02 (0.04)**	−0.00 (0.85)	−0.00 (0.57)	−0.06 (0.00)***
ΔLogER	0.00 (0.92)	0.06 (0.21)	0.01 (0.62)	−0.01 (0.69)	−0.05 (0.17)	0.11 (0.00)***
ECT(−1)	−0.05 (0.00)***	−0.10 (0.00)***	−0.75 (0.00)***	−0.25 (0.00)***	−0.50 (0.00)***	−0.82 (0.00)***

Note: ***, **, * represents 1%, 5% and 10% respectively. P-values are reported in parentheses.

Table 7. Diagnostic tests on regressions

	Lgedu	Lgdef	Lghlth	Lghsng	Lgrec	Lgp_saf	Lgsoc_proc
Panel A: “Expenditure items”
χ^2NOR	0.24	0.29	0.38	0.68	0.56	0.13	0.26
χ^2HET	0.20	0.70	0.83	0.61	0.99	0.87	0.57
χ^2SC	0.15	0.48	0.65	1.61	0.05	0.32	1.39
χ^2FF	0.74	0.62	1.52	2.28	0.58	0.82	1.96
CUSUM	Stable	Stable	Stable	Stable	Stable	Stable	Stable
CUSUM.SQ	Stable	Stable	Stable	Stable	Stable	Stable	Stable
Panel B: “Revenue items”
	Lgvat	Lgsacu	LgInc_tax	LgProp_tax	LgInt_tax	Lgfuel_tax
χ^2NOR	0.34	0.17	0.49	0.65	0.28	0.66
χ^2HET	0.33	0.70	0.65	0.51	0.97	0.30
χ^2SC	0.49	0.13	0.26	0.27	0.24	0.32
χ^2FF	0.51	0.54	0.50	0.33	0.82	0.59
CUSUM	Stable	Stable	Stable	Stable	Stable	Stable
CUSUM.SQ	Stable	Stable	Stable	Stable	Stable	Stable