public expenditure

government finance

Also known as: government expenditure, government spending, public spending(Show More)

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July 13, 2026

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Public expenditure refers to the spending by governments to provide goods and services, such as education, healthcare, and defense. It also includes social security payments and subsidies to individuals and companies. Governments finance these expenditures primarily through taxation, but also through the sale of goods and services, and by borrowing.12

In many Western countries, public sector spending typically accounts for 20 to 30 percent of economic activity. However, the total share of national income collected through taxes, profits from government activities, or borrowing can be around 40 percent, reflecting redistributive efforts and direct government services. The proportion of national income devoted to public expenditure varies significantly between developed nations, influenced by choices regarding healthcare provision and the extent of transfer payments.1

Controlling public expenditure can be challenging, especially for "demand-led" programs like social security, which are influenced by factors like population longevity and unemployment rates. Public sector efficiency is a major goal, though it can be difficult to achieve due to a lack of market-driven incentives and a tendency to resist innovation. Governments often use budgets as a key tool for planning, managing programs, and ensuring accountability.34

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government budget
Composition of public expenditure
Expenditures authorized under a national budget are divided into two main categories. The first is the government purchase of goods and services in order to provide services such as education, health care, or defense. The second is the payment of social security and…
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Expenditures authorized under a national budget are divided into two main categories. The first is the government purchase of goods and services in order to provide services such as education, health care, or defense. The second is the payment of social security and…
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economic forecasting
Forecasting the GNP and its elements
…three major components: spending by government, private investment spending, and spending by consumers. Net exports (that is, exports minus imports) are also counted in the GNP but their magnitude, which may be positive or negative, is usually small. (For the nations that depend more heavily on foreign trade, like Japan…
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…three major components: spending by government, private investment spending, and spending by consumers. Net exports (that is, exports minus imports) are also counted in the GNP but their magnitude, which may be positive or negative, is usually small. (For the nations that depend more heavily on foreign trade, like Japan…
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property tax
Tax rates
…a means of funding additional spending. When a strong demand for some particular service appears but officials prefer not to raise their “general fund” rates, a legislative body may vote to mandate a “special” rate. For example, U.S. state governments formerly used the property tax as a flexible element, relying…
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…a means of funding additional spending. When a strong demand for some particular service appears but officials prefer not to raise their “general fund” rates, a legislative body may vote to mandate a “special” rate. For example, U.S. state governments formerly used the property tax as a flexible element, relying…
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defense economics
Defense burdens worldwide
…account for major shares of government expenditures. In many low-income countries, these expenditures often exceed 20–30 percent of the state budget and more than 10 percent of the country’s GDP. The higher-income countries, while spending higher absolute amounts on defense, tend to spend smaller proportions of state expenditure (under 15…
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…account for major shares of government expenditures. In many low-income countries, these expenditures often exceed 20–30 percent of the state budget and more than 10 percent of the country’s GDP. The higher-income countries, while spending higher absolute amounts on defense, tend to spend smaller proportions of state expenditure (under 15…
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