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Can a Government Enhance Long-Run Growth by Changing the Composition of Public Expenditure?
Author:
Mr. Santiago Acosta Ormaechea
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and
Atsuyoshi Morozumi null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2013: Issue 162
Language:
English
Publication Date:
08 Jul 2013
DOI:
https://doi.org/10.5089/9781475550597.001
ISBN:
9781475550597
ISSN:
1018-5941
Pages:
45
Keywords:
WP; central government; dependent variable; economic growth; fiscal policy; Expenditure composition; panel-data analysis; increase in capital expenditure; spending envelope; share variable; expenditure outlay; expenditure composition information; expenditure subcomponent; lowering spending trend; disaggregated fiscal expenditure dataset; spending reallocation; spendings fall; public education; Education spending; Total expenditures; Social protection spending; Capital spending
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper studies the effects of public expenditure reallocations on long-run growth. To do this, we assemble a new dataset based on the IMF’s GFS yearbook for the period 1970-2010 and 56 countries (14 low-, 16 medium-, and 26 high-income countries). Using dynamic panel GMM estimators, we find that a reallocation involving a rise in education spending has a positive and statistically robust effect on growth, when the compensating factor remains unspecified or when this is associated with an offsetting reduction in social protection spending. We also find that public capital spending relative to current spending appears to be associated with higher growth, yet results are non-robust in this latter case.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund