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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.

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Bibliographic Info

Paper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2007/29.

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Date of creation: 2007
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Handle: RePEc:ise:isegwp:wp292007

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Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC

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Keywords: economic growth; panel models; fiscal policy.;

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References

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Citations

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Cited by:
  1. Paula Faria & Francisco Vitorino da Silva Martins & Elísio Fernando Moreira Brandão, 2011. "How R&D and tax incentives influence economic growth: Econometric study for the period between 1995 and 2008 of EU-15," FEP Working Papers 442, Universidade do Porto, Faculdade de Economia do Porto.
  2. António Afonso & Jo�o Tovar Jalles, 2014. "Fiscal composition and long-term growth," Applied Economics, Taylor & Francis Journals, vol. 46(3), pages 349-358, January.
  3. Benos, Nikos, 2009. "Fiscal policy and economic growth: empirical evidence from EU countries," MPRA Paper 19174, University Library of Munich, Germany.
  4. Hardt, Ulrike & Schiller, Daniel, 2009. "Wirtschaftsentwicklung und kommunale Aufgabenerfüllung in Niedersachsen," Forschungs- und Sitzungsberichte der ARL: Aufsätze, in: Öffentliche Finanzströme und räumliche Entwicklung, pages 265-292 Akademie für Raumforschung und Landesplanung (ARL) - Leibniz-Forum für Raumwissenschaften.
  5. Alfredo Marvão Pereira & Jorge M. Andraz, 2014. "On The Long-Term Macroeconomic Effects Of Social Security Spending:Evidence For 12 Eu Countries," Working Papers 150, Department of Economics, College of William and Mary.
  6. Eleftherios Goulas & Athina Zervoyianni, 2012. "Growth, Deficits and Uncertainty in a Panel of 28 Countries," Working Paper Series 52_12, The Rimini Centre for Economic Analysis.
  7. Alfredo Pereira & Jorge Andraz, 2012. "Social security and economic performance in Portugal: after all that has been said and done how much has actually changed?," Portuguese Economic Journal, Springer, vol. 11(2), pages 83-100, August.
  8. António Afonso & João Tovar Jalles, 2012. "The Fiscal-Growth Nexus," Working Papers Department of Economics 2012/01, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  9. Vratislav Izák, 2011. "The Welfare State and Economic Growth," Prague Economic Papers, University of Economics, Prague, vol. 2011(4), pages 291-308.
  10. Roland Döhrn & Tobias Kitlinski & Martin Micheli & Torsten Schmidt & Simeon Vosen & György Barabas & Heinz Gebhardt & Lina Zimmermann, 2011. "Die wirtschaftliche Entwicklung im Inland zur Jahreswende 2010/2011 - Feste Konjunktur in unsicherem Umfeld," RWI Konjunkturbericht, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, pages 56, 03.
  11. Vratislav Izák, 2011. "Government Expenditures and Taxes Influence on the Economic Growth (Empirical Analysis)," Politická ekonomie, University of Economics, Prague, vol. 2011(2), pages 147-163.
  12. Cosmin Enache, 2009. "Fiscal Policy And Economic Growth In Romania," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(11), pages 50.
  13. Steiner, Viktor, 2010. "Konsolidierung der Staatsfinanzen," Discussion Papers 2010/9, Free University Berlin, School of Business & Economics.
  14. Goulas, Eleftherios & Zervoyianni, Athina, 2013. "Growth, deficits and uncertainty: Theoretical aspects and empirical evidence from a panel of 27 countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(4), pages 380-392.
  15. Olayeni, Olaolu Richard, 2009. "A Bayesian analysis of government expenditure in Nigeria," MPRA Paper 18244, University Library of Munich, Germany.
  16. Hans Pitlik & Margit Schratzenstaller, 2011. "Growth Implications of Structure and Size of Public Sectors," WIFO Working Papers 404, WIFO.
  17. Roland Döhrn & György Barabas & Heinz Gebhardt & Tobias Kitlinski & Martin Micheli & Torsten Schmidt & Simeon Vosen & Lina Zwick, 2012. "Die wirtschaftliche Entwicklung im Inland: Gedämpfte Expansion bei hohen Risiken," RWI Konjunkturbericht, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, pages 57, 09.
  18. Eleftherios Goulas & Athina Zervoyianni, 2013. "Growth, Deficits and Uncertainty: Theoretical Aspects and Empirical Evidence," Working Paper Series 53_13, The Rimini Centre for Economic Analysis.
  19. Alfredo Marvão Pereira & Jorge M. Andraz, 2014. "On The Long-Term Macroeconomic Effects Of Social Spending In The United States," Working Papers 151, Department of Economics, College of William and Mary.
  20. Nils aus dem Moore & Boris Beimann & Heinz Gebhardt & Rainer Kambeck, 2011. "Der Weg zu nachhaltigen Finanzen: Weniger Soziales, mehr Investitionen," RWI Positionen, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, pages 22, 04.

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