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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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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Do Taxes Affect Economic Growth?
      by Matt Mitchell in Neighborhood Effects on 2012-09-21 20:59:33
    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:
    1. Benos, Nikos, 2009. "Fiscal policy and economic growth: empirical evidence from EU countries," MPRA Paper 19174, University Library of Munich, Germany.
    2. Eleftherios Goulas & Athina Zervoyianni, 2012. "Growth, Deficits and Uncertainty in a Panel of 28 Countries," Working Paper Series 52_12, The Rimini Centre for Economic Analysis.
    3. Eleftherios Goulas & Athina Zervoyianni, 2012. "Economic Growth and Crime: Does Uncertainty Matter?," Working Paper Series 51_12, The Rimini Centre for Economic Analysis.
    4. Falcó-Gimeno, Albert & Jurado, Ignacio, 2011. "Minority governments and budget deficits: The role of the opposition," European Journal of Political Economy, Elsevier, vol. 27(3), pages 554-565, September.
    5. António Afonso & Juan González Alegre, 2007. "Economic Growth and Budgetary Components: a Panel Assessment for the EU," Working Papers 2007/29, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon..
    6. Szarowska, Irena, 2010. "Changes in taxation and their impact on economic growth in the European Union," MPRA Paper 32354, University Library of Munich, Germany.
    7. Bergh, Andreas & Karlsson, Martin, 2009. "Government Size and Growth: Accounting for Economic Freedom and Globalization," Ratio Working Papers 130, The Ratio Institute.
    8. Szarowska, Irena, 2010. "Recession, taxes and economic growth," MPRA Paper 32355, University Library of Munich, Germany.
    9. Hans Pitlik & Margit Schratzenstaller, 2011. "Growth Implications of Structure and Size of Public Sectors," WIFO Working Papers 404, WIFO.
    10. Antonio N. Bojanic, 2013. "The composition of government expenditures and economic growth in Bolivia," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 50(1), pages 83-105, May.
    11. Dackehag , Margareta & Hansson, Åsa, 2012. "Taxation of Income and Economic Growth: An Empirical Analysis of 25 Rich OECD Countries," Working Papers 2012:6, Lund University, Department of Economics.

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