The Effect of Government Capital Expenditure and Private Investment on Social Welfare

Abstract

The main purpose of this study is: 1. Examine and analyze the effect of government capital expenditure on social welfare; 2. Examine and analyze the effect of private investment on social welfare. Technical analysis is path analysis, regresion OLS is used with data panel. Exogenous variables are government capital expenditure and private investment. Endogenous variables are output, labor usage and social welfare,  where output and labor usage are mediator variables. The statistical results show that all relationship have a significant. Private investment have more effect on social welfare rather than goverment capital expenditure. There are two empirical finding from this study: First finding, there is subtitution effect between private investment and labor usage, more private investment, less labor usage. On the other hand, there is output effect between output and labor usage, more output more labor usage. Total effect of private investment on labor usage is positive. Second finding, labor usage have a negative relationship to social welfare, higher labor usage, lower social welfare.

Keywords: capital expenditure, private investment, ouput, labor usage, social welfare