PUBLIC EXPENDITURE, ECONOMIC GROWTH, INVESTMENT, AND POVERTY REDUCTION: A SYSTEMATIC LITERATURE REVIEW

Resumo

This article presents a systematic literature review examining the relationship between government expenditure and poverty reduction, with particular attention to expenditure composition, transmission mechanisms, and governance conditions in developing and decentralized economies. Although government spending is widely regarded as a central policy instrument for poverty alleviation, empirical findings remain mixed and highly context-dependent.  Using a systematic review approach, this study synthesizes evidence from international empirical and theoretical studies to identify consistent patterns, divergences, and underlying mechanisms linking public expenditure to poverty outcomes. The review finds that aggregate government expenditure does not automatically reduce poverty; rather, its effectiveness depends critically on how resources are allocated and governed. Expenditures on education and health demonstrate the most robust and sustained poverty-reduction effects through human capital accumulation, while social protection spending is effective in reducing extreme poverty when programs are well targeted and institutionally sound. In contrast, expenditure on economic affairs and infrastructure yields heterogeneous poverty outcomes, largely conditional on project design, spatial targeting, and institutional quality. The findings further highlight economic growth and investment as key transmission mechanisms, emphasizing that growth must be inclusive and employment-generating to produce meaningful poverty reduction. Governance quality emerges as a foundational moderating factor that strengthens or weakens the effectiveness of public spending across sectors. This study contributes to the literature by offering an integrated conceptual framework that clarifies the conditional pathways through which government expenditure affects poverty. From a policy perspective, the results underscore that effective poverty reduction requires not merely increased public spending, but strategic allocation toward pro-poor sectors, strong governance frameworks, and a clear focus on inclusive growth, particularly in countries facing persistent regional disparities.