Building Sustainaable Future: Governance, Public Spending, and Sustainable Development Nexus in Developed Countries

Governance, Public Spending and Sustainable Development

Abstract

Sustainable development emphasizes the balanced use of resources for both current and future generations. For this purpose, governance plays a vital role in managing resources and preventing the misuse of public funds, which are crucial for sustainable development (SD).  This study has focused on the simultaneous relationship between governance, public spending, and SD. This study uses panel data, covers the period between 2006 and 2022, and includes 34 developed countries. The empirical findings of panel GMM show a positive and significant impact of governance and public spending on SD. The outcomes indicate that governance and SD have a significant impact on public spending. Public spending has a negative and significant impact on governance, whereas SD has a significant impact on governance. For future policy implications, developed countries should focus on eliminating expenditure trends directed towards political elites and unproductive subsidies, all of which undermine the effectiveness of the governance structure. Governments should establish more powerful auditing mechanisms and regulatory organizations so that funds are spent effectively and to enhance strong governance structures.