Why is ''XYZ Spending as a Percentage of GDP'' given more importance than XYZ spending as a percentage of the Total Government Expenditure/Budget.

For example, i was looking at certain countries spending on R&D and it was given as a percentage of their GDP. Why should it be shown as a percentage of GDP.

2 Nations might have the Same GDP but the Government Budget Expenditure and Revenue/Receipts may differ a lot.


1 Answer 1


Because comparing spending as a size of a total economy is meaningful for making international comparisons of how much countries spend on something.

Comparing spending as a total size of government budget obfuscates reality because some countries might just prefer having larger governments but that does not mean that the country actually devotes more resources to some activity.

Hence comparing spending on something as a size of government budget would not allow you to do meaningful international comparisons without first some other adjustments whether making it relative to country size does allow you to make meaningful comparisons.

  • $\begingroup$ Why wouldn't it be meaningful though ? I can say my country spent 10 % of its budget on healthcare, and your country spent 20 % of your country's budget on Healthcare. So your country spends more on healthcare relative to mine as a percentage of total government spending. And that your country gives more importance to healthcare and spends the other 80 % of its budget on other things. $\endgroup$
    – Aman
    Commented Oct 9, 2022 at 12:50
  • $\begingroup$ @Aman not for international comparisons. As mentioned in my answer some countries have larger government some smaller governments. If you have two identical country (say GDP in both countries is 100), they both spend 20 on healthcare then HS/GDP will be exactly equal for both countries, which is exactly what good international measure should tell you. Now suppose we take your idea, again we have 2 identical countries both have 100 GDP and spend 20 on healthcare, but one country has larger government G in the first country is 50 and in second country 25. Using your measure you would conclude $\endgroup$
    – 1muflon1
    Commented Oct 9, 2022 at 13:13
  • $\begingroup$ that first country is devoting less of its resources to healthcare spending which is simply prima facie completely absurd since both countries devote the same proportion of resources to healthcare, one simply has preference for larger government. Consequently such measure does not allow you to make meaningful international comparison of healthcare spending because you no longer look just at healthcare spending but you confound it by preference for government size. That would be like trying to measure how fat people and instead of using standardizing weight by heigh (since of course larger $\endgroup$
    – 1muflon1
    Commented Oct 9, 2022 at 13:16
  • $\begingroup$ person will have more weight) you will standardize it by their IQ or something else like that. It would simply no longer allow you to make meaningful interpersonal comparison of how fat people are. $\endgroup$
    – 1muflon1
    Commented Oct 9, 2022 at 13:17
  • $\begingroup$ @Aman In Germany you pay 9% (IIRC) health insurance but it's not part of government so the government budget is that much smaller. In other countries you still pay 9% but it is part of government budget. So what is the point of comparing these? $\endgroup$ Commented Oct 10, 2022 at 15:41

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