The composition of public expenditure and economic growth

Abstract

Noting that the literature has focused on the link between the level of public expendi ture and growth, we derive conditions under which a change in the composition of expenditure leads to a higher steady-state growth rate of the economy. The conditions depend not just on the physical productivity of the different components of public expenditure but also on the initial shares. Using data from 43 developing countries over 20 years we show that an increase in the share of current expenditure has positive and statistically significant growth effects. By contrast, the relationship between the capital component of public expenditure and per-capita growth is negative. Thus, seemingly productive expenditures, when used in excess, could become unproductive. These results imply that developing-country governments have been misallocating public expenditures in favor of capital expenditures at the expense of current expenditures.

Public Sector Size and GDP Growth Nexus: Panel Data Estimation

“…Low rates of investment in physical capital have implications for the rates of return on human capital, particularly education (Appleton and Teal, 1998). This finding conforms to the findings by Loto (2011) and Knight et al (1996) but contrasts those by Gemmel (2001) and Devarajan et al (1996) for 140 OECD countries. According to Kweka and Morrissey (1999);Josaphat and Oliver (2000) on their study on Tanzania, allocation on human capital investment was insignificant in the regressions, probably because effects from education sector would have very long lags (Gisore et al, 2014).…”

Does public sector efficiency matter? Revisiting the relation between fiscal size and economic growth in a world sample

“…In other words, each country's PSP and PEX are expressed as percentages of the respective average (normalized to be 1), and in turn the PSE is obtained 3 An additional potential explanation that has received a lot of empirical support is that the overall size of government cannot capture the different implications of different government activities. As has been shown (see e.g., Devarajan et al 1996;Kneller et al 1999;, the growth effects of the different components of government expenditure, as well as of the various types of tax instruments, are not the same. See also Angelopoulos and Philippopoulos (2007) for a single country, time-series study that also supports the result that both the composition and efficiency of the government matter.…”

The Scope of Government and Economic Growth

“…Marlow (1986), Landau (1983), Cameron (1982) 3 , Hansson a Henrekson (1994), Devarajan et al (1996), Chen a Lee (2005). Na tyto práce navázal výzkum vztahu mezi hospodářským růstem a veřejnými výdaji společně s veřejnými příjmy.…”