Government spending linked to investment
Comparing General government total expenditure (current LCU), per capita with Gross capital formation (current LCU), per unit of GDP across 167 countries, 2024–2025.
- Rank correlation
- +0.66
- Holding size constant
- +0.68
- Countries compared
- 167
- Period
- 2024–2025
What might link these
The relationship between government expenditure and gross capital formation might be driven by government investments in infrastructure, which could stimulate private investment. However, a careful reader should be cautious about potential confounders like institutional quality or economic stability. Education level could also play a role in this relationship.
Why this is not proof of anything
This is a correlation across countries, not an experiment. It cannot show that either indicator causes the other, and both may simply follow a third thing. This correlation could mislead by implying a direct causal link between government spending and investment, when in fact other factors may be driving both indicators.
The second figure above repeats the measurement with national population and income held constant. It is the more conservative number: a relationship that largely disappears there was mostly telling you that larger, richer countries have more of most things.
How this was measured
Both indicators were ranked across every country reporting each, and the two rankings compared — ranks rather than raw values, because a handful of very large countries can otherwise manufacture a relationship on their own. The calculation is arithmetic over figures already published on this site; the commentary above is drafted from the two indicator names and the resulting coefficients.