The Role of Government in Capital Constrained Economies
AbstractIs the role of government different in poor countries? We examine the government's role for growth in 40 LDCs with low infrastructure levels and limited access to capital. We consider both expenditure and financing aspects of government activity, but cannot conclude that governments in LDCs differ substantially from those with more efficient allocation mechanisms for private capital. However, we find that government consumption expenditure is a negative robust determinant of growth, emphasizing the importance of efficient allocation of government expenditure to reproductive investment. Although the debt-service ratio is not significant, increased public borrowing is a robust negative determinant of growth.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 215.
Length: 36 pages
Date of creation: 15 Dec 1997
Date of revision:
Note: This working paper is replaced by no. 275
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Growth; developing countries; government; public investment; public debt;
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- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
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