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Fiscal Policy and Economic Development

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  • Alex Mourmouras
  • Peter Rangazas

Abstract

This paper offers possible explanations for three generally observed facts about fiscal policy and development: (F1) The relative size of government increases as an economy develops, (F2) The rise in government and taxation are associated with rising or constant economic growth rates, and (F3) Today''s developing countries have larger government sectors than did today''s developed countries at similar stages of development. The explanations for these facts are based on the structural transformation from traditional (mostly agricultural) to modern (industrial and post-industrial) production, rising public infrastructure investment, and less representative governments in many of today''s developing economies.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/155.

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Length: 33
Date of creation: 01 Jun 2008
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Handle: RePEc:imf:imfwpa:08/155

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Keywords: Fiscal policy; Agriculture; Developed countries; Developing countries; Government finance statistics; Taxation; tax rates; growth rates; economic growth; tax base; growth rate; tax revenue; economic growth rates; budget constraint; government budget; private consumption; government budget constraint; tax revenues; growth model; public expenditures; tax evasion; tax structure; government expenditure; neoclassical growth model; formal sector; public expenditure; tax changes; capital formation; government spending; public spending; government expenditures; tax share;

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Cited by:
  1. Susana Martins & Francisco José Veiga, 2013. "Government size, composition of public expenditure, and economic development," NIPE Working Papers 17/2013, NIPE - Universidade do Minho.

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