The effects of economic growth on government human development expenditures
are bound to complement private expenditure channels. In fact, Anand and Ravallion
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(1993) find that most of the effects of economic growth on HD are likely to flow through
government budgetary expenditures, central or local. However, the strength of this effect
depends entirely on the effectiveness of expenditure targeting and delivery. The
government must identify priority sectors such as primary education and health that have
the highest potential for HD improvement. Government expenditures for HD should be
distributed predominantly to low income groups and areas since it is here that the highest
marginal impact will be had. Government must also have the institutional capacity to
efficiently allocate these expenditures. Studies by Rajkumar and Swaroop (2002) have
demonstrated that the effectiveness of public expenditure is conditional on the quality of
governance, with government accountability likely to play an important role. While
empirical evidence here is more spotty, theory suggests that a decentralized, locally
accountable government system may have advantages in resource allocation and service
delivery