Fiscal policy, institutions and inclusive growth: evidence from the developing Asian countries

Purpose The purpose of this paper is to examine the impact of fiscal policy and institutional quality on the inclusive growth process of the selected developing Asian countries. Inclusive growth is a growth process which ensures that everyone is participating and benefited by growth process. Design/methodology/approach This study uses system generalized method of moment to address the problem of endogeneity and omitted variable bias. Findings Empirical results showed that both fiscal policy and institutions have positive effects on inclusive growth. Our empirical results confirmed that fiscal policy can work more efficiently in the presence of good quality institutions in the developing Asian countries. Originality/value In this study, proxies used for fiscal policy are government expenditures and tax revenues as a percentage of gross domestic product (GDP) to examine its impact on the certain measures of inclusive growth such as employment, income inequality and GDP per capita. This study provides useful insights for the policy makers using fiscal policy to achieve the goal of inclusive growth in developing countries.