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Government size, composition of public expenditure, and economic development

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  • Susana Martins

    ()
    (Universidade do Minho, Escola de Economia e Gestão)

  • Francisco José Veiga

    ()
    (Universidade do Minho - NIPE)

Abstract

This paper analyzes the effects of government size and of the composition of public expenditure on economic development. Using the system-GMM estimator for linear dynamic panel data models, on a sample covering up to 156 countries and 5-year periods from 1980 to 2010, we find that government size as a percentage of GDP has a quadratic (inverted U-shaped) effect on the growth rate of the Human Development Index (HDI). This effect is especially pronounced in developed and high income countries. We also find that the composition of public expenditure affects development, with the share of five subcomponents exhibiting non-linear relationships with HDI growth.

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Bibliographic Info

Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 17/2013.

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Date of creation: 2013
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Handle: RePEc:nip:nipewp:17/2013

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Postal: Núcleo de Investigação em Políticas Económicas, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal
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Keywords: Economic Development; Government Size; Composition of public expenditure; Human Development Index;

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