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Economic Growth and Budgetary Components: a Panel Assessment for the EU

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  • António Afonso
  • Juan González Alegre

Abstract

In this paper we test whether a reallocation of government budget items can enhance long-term GDP growth in a set of European countries. We apply modern panel data techniques to the period 1970-2006, and we use three alternative dependent variables in a growth regression: economic growth, total factor productivity and labour productivity. Our results are able to identify also the distortions induced by public expenditure in the private factors allocation. In particular, we detect a strong crowding-in effect associated to public investment, which have enhanced economic growth by boosting private investment. We also associate a significant dependence of productivity on public expenditure on education as well as the role of social security and health issues in growth and the labour market.

Suggested Citation

  • António Afonso & Juan González Alegre, 2007. "Economic Growth and Budgetary Components: a Panel Assessment for the EU," Working Papers Department of Economics 2007/29, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    • Handle: RePEc:ise:isegwp:wp292007
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    More about this item

    Keywords

    economic growth; panel models; fiscal policy.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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