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Public Expenditure and Growth in Developing Countries: Education is the Key

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Author Info
N Bose
M E Haque
D R Osborn

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Abstract

This paper examines the growth effects of government expenditure for a panel of thirty developing countries over the decades of the 1970s and 1980s, with a particular focus on sectoral expenditures. Our methodology improves on previous research on this topic by explicitly recognising the role of the government budget constraint and the possible biases arising from omitted variables. Our primary results are twofold. Firstly, the share of government capital expenditure in GDP is positively and significantly correlated with economic growth, but current expenditure is insignificant. Secondly, at the sectoral level, government investment and total expenditures in education are the only outlays that are significantly associated with growth once the budget constraint and omitted variables are taken into consideration. Therefore, we conclude that education is the key to growth for developing countries.

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File URL: http://www.socialsciences.manchester.ac.uk/cgbcr/dpcgbcr/dpcgbcr30.pdf
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Publisher Info
Paper provided by Economics, The Univeristy of Manchester in its series Centre for Growth and Business Cycle Research Discussion Paper Series with number 30.

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Length: 27 pages
Date of creation: 2003
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Handle: RePEc:man:cgbcrp:30

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Related research
Keywords: public expenditure; economic growth; education; omission bias; public financing; budget constraint;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  7. Helms, L Jay, 1985. "The Effect of State and Local Taxes on Economic Growth: A Time Series-Cross Section Approach," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 574-82, November. [Downloadable!] (restricted)
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  20. Biswas, Basudeb & Ram, Rati, 1986. "Military Expenditures and Economic Growth in Less Developed Countries: An Augmented Model and Further Evidence," Economic Development and Cultural Change, University of Chicago Press, vol. 34(2), pages 361-72, January.
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  23. Romer, Paul M., 1990. "Human capital and growth: Theory and evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 251-286, January. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Michael A. Clemens, 2004. "The Long Walk to School: International education goals in historical perspective," Development and Comp Systems 0403007, EconWPA. [Downloadable!]
    Other versions:
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