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Public expenditure and economic growth: a regional analysis for Colombia, 1984-2012

Author

Listed:
  • Jacobo Campo

    (Universidad Católica de Colombia)

  • Henry Mendoza

    (Universidad Católica de Colombia)

Abstract

The empirical literature shows mixed results regarding the impact of public spending on the gross domestic product (GDP) of countries in general. This paper presents evidence on the impact of public spending on regional GDP in 24 departments of Colombia, during the period 1984-2012. In addition, we apply a causality test with panel data with the aim to determine whether this relationship is supported by the Keynesian approach or the Wagnerian approach. Using a model of cointegrated panel data, we obtain the long-run equilibrium relationship and estimate its coefficients. The results show a significant and positive effect of primary public spending on GDP, which is in line with the Keynesian approach and confirms the hypothesis that increases in public spending contribute to economic growth.

Suggested Citation

  • Jacobo Campo & Henry Mendoza, 2018. "Public expenditure and economic growth: a regional analysis for Colombia, 1984-2012," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 88, pages 77-108, Enero - J.
    • Handle: RePEc:lde:journl:y:2018:i:88:p:77-108
    DOI: 10.17533/udea.le.n88a03
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    More about this item

    Keywords

    public expenditure; Keynesian approach; Wagner’s law; panel data; cointegration; Granger causality; Colombia;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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