From Public Social Spending to Economic Growth: A Systematic Review of Human Capital, Investment, and Labor-Market Transmission Mechanisms

Abstract

This study systematically reviews how public social spending is translated into economic growth through human capital, investment, and labor-market mechanisms. A targeted scholarly metadata search covering 2020–2025 produced 70 DOI-bearing candidate articles published in journals screened within SJR quartiles Q1–Q4. After title/metadata screening, eligibility assessment, and methodological quality appraisal, 32 high- and moderate-quality studies were retained for the primary synthesis. The evidence was analyzed through systematic thematic coding and title-term bibliometric mapping. Four clusters emerged: health spending and growth/productivity (11 studies), education/public social spending and human capital (8), human capital and investment/FDI (8), and labor-market/unemployment transmission (5). The synthesis shows that public health and education expenditure is not uniformly growth-enhancing; its effects depend on whether spending is converted into usable human capital and whether institutional and productive conditions allow those capabilities to be utilized. Human capital emerges as both a direct productive asset and an absorptive capacity that raises the productivity of physical investment and foreign direct investment. Labor-market conditions complete the transmission chain because unemployment can leave accumulated skills underutilized and can generate persistent scarring. The review proposes the SHIL-Growth framework, in which Social spending builds Human capital, Human capital improves Investment absorption, Labor-market utilization converts productive capacity into realized output, and Growth results from the interaction of these stages. Institutional quality, development level, regional structure, and spending efficiency operate as boundary conditions. The main research gap is the scarcity of studies that estimate the complete transmission chain in an integrated empirical model.