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Public Spending for Long-Run Growth: A Practitioners’ View

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  • Norman Gemmell
  • Florian Misch
  • Blanca Moreno-Dodson

    ()
    (World Bank)

Abstract

By financing public goods and services that enhance productivity and promote private investment, public spending is widely believed to be critical for long-run growth. Such effects are distinct from any short-run Keynesian response to a public spending stimulus. While a short-run response generally operates through aggregate demand, long-run growth effects alter aggregate supply conditions. While academic literature generally supports the belief that public spending promotes growth in the long run, understanding which public expenditure allocations can trigger such effects in a particular country setting is challenging in practice. The objective of this note1 is to review the trade-offs faced by fiscal policy makers in developing countries who are considering using public expenditure policy as an instrument to promote longrun growth, provide guidance from the empirical literature, and review the types of data sources that are helpful in this context.

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Bibliographic Info

Article provided by The World Bank in its journal Economic Premise.

Volume (Year): (2012)
Issue (Month): 99 (December)
Pages: 1-4

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Handle: RePEc:wbk:prmecp:ep99

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  1. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  2. Ward Romp & Jakob de Haan, 2007. "Public Capital and Economic Growth: A Critical Survey," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(s1), pages 6-52, 04.
  3. Adam, Christopher S. & Bevan, David L., 2005. "Fiscal deficits and growth in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 571-597, April.
  4. Krueger, Anne O, 1998. "Why Trade Liberalisation Is Good for Growth," Economic Journal, Royal Economic Society, vol. 108(450), pages 1513-22, September.
  5. Ritva Reinikka & Jakob Svensson, 2004. "Local Capture: Evidence From a Central Government Transfer Program in Uganda," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 678-704, May.
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Cited by:
  1. Kneller, Richard & Misch, Florian, 2013. "The effects of public spending composition on firm productivity," ZEW Discussion Papers 13-014, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Misch, Florian & Gemmell, Norman & Kneller, Richard, 2014. "Complementarity in Models of Public Finance and Endogenous Growth," Working Paper Series 3136, Victoria University of Wellington, Chair in Public Finance.

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