The impact of local government expenditure on regional economic growth in Mongolia: Evidence from province-level panel data
Year: 2026
Type: article
Abstract: This study examines the impact of local government expenditure on regional economic growth in Mongolia using province-level panel data for 21 provinces over the period 2015–2024. The empirical analysis is based on an augmented Cobb–Douglas framework and estimates pooled OLS, random-effects, and two-way fixed-effects models. A Hausman specification test strongly rejects the random-effects model (χ² = 47.60, p < 0.01), supporting the use of the two-way fixed-effects specification as the preferred model. The results show that local government expenditure is positively and statistically significantly associated with regional output, with a 1 percent increase in local government expenditure associated with approximately a 0.257 percent increase in GRDP, conditional on population, gross fixed assets, university enrollment, province fixed effects, and year effects. A productivity-oriented specification further shows that local government expenditure per capita is positively related to GRDP per capita, indicating that the expenditure-output relationship is also reflected in labor productivity. This study provides the first empirical examination of the relationship between local government expenditure and regional economic growth in Mongolia. The findings suggest that local fiscal expenditure can serve as an important policy instrument for regional development and provide a foundation for future research on the effects of different expenditure categories, thereby supporting the design of more effective and evidence-based regional fiscal policies.
Institution: University of Finance and Economics
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W7214635083