Empirical studies have been unable to provide a consistent answer regarding the long-run relationship between government education expenditures and percapita output growth. In this paper, we develop a simple endogenous growth model whereby growth is a function of both government education expenditures and taxation. Using pooled data from 1960 to 2000 for 83 countries, we test our growth equation and find that imposing the government budget constraint is imperative when estimating the relationship between expenditures and growth. Furthermore, we find a robust positive relationship between education expenditures and growth for rich countries when the method of finance is considered but no significant relationship for poor and middle-income countries.
Are di¨erent regions of the United States experiencing convergence in levels of GDP? Carlino and Mills (1993) examined this question through time-series techniques, and found some evidence in favor of regional convergence. This paper checks the robustness of their results by using new econometric methods proposed by Vogelsang (1998). Our results, together with results from Loewy and Papell (1996), suggest there is stronger evidence in favor of convergence than previously thought based on the results of Carlino and Mills (1993).
Do state policy makers have the ability to affect a state's rate of economic growth? This article examines one possible source of growth and per capita output level disparities by studying the role that state taxation and public expenditure decisions play in fostering economic development. Using pooled annual U.S. state-level data from 1972 to 1998, a fixed-effects model is employed to examine the effects of changing tax rates on both state per capita output levels and growth rates. The results indicate that higher tax rates negatively influence short-run state economic growth, which lowers state output levels. However, long-run growth is unaffected by changes in state tax rates, even after adjusting for the effects of initial per capita output levels, state expenditures, and aid from the federal government. Nor do changes in state public spending rates and federal aid permanently alter state growth rates, implying that state fiscal policies have only transitory effects on state growth. (JEL H71, O40, R11)
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