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Public finances and long-term growth in Europe: Evidence from a panel data analysis

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  • Romero-Ávila, Diego
  • Strauch, Rolf
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    Abstract

    This paper addresses the question whether public finance reform can affect trend growth in the EU-15. Focusing on time series patterns, we investigate whether there have been persistent trends in economic growth and fiscal variables over the last 40Â years. In addition, we estimate a distributed lag model, which 1) indicates that government size measured either with total expenditure or revenue shares, government consumption and direct taxation negatively affect growth rates of GDP per capita, while public investment has a positive impact, and 2) provides robust evidence that distortionary taxation affects growth in the medium-term through its impact on the accumulation of private capital.

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    Bibliographic Info

    Article provided by Elsevier in its journal European Journal of Political Economy.

    Volume (Year): 24 (2008)
    Issue (Month): 1 (March)
    Pages: 172-191

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    Handle: RePEc:eee:poleco:v:24:y:2008:i:1:p:172-191

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    Web page: http://www.elsevier.com/locate/inca/505544

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    1. Do Taxes Affect Economic Growth?
      by Matt Mitchell in Neighborhood Effects on 2012-09-21 20:59:33
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