What do governments buy? The composition of public spending and economic performance
AbstractThe authors develop a simple analytical framework that shows how the composition of public spending affects economic growth. Distinguishing between productive and unproductive government spending (that which complements private sector productivity and that which does not), they show that increasing the share of productive spending leads to a higher steady-state economic growth rate. They use data from 69 developing countries over 20 years to determine which components of public spending are productive. They find that an increase in the share of current spending has positive and statistically significant effects on growth. Otherwise, the news is mainly negative. The relationship between the capital component of public spending and per capita growth is negative. The same is true of the share of spending on transport and communications. The shares spent on health and education have no significant impact, although parts of those shares - the parts spent on preventative care and"other education"- do. The results raise the question whether public spending actually leads to a flow of public goods and services.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 1082.
Date of creation: 28 Feb 1993
Date of revision:
National Governance; Achieving Shared Growth; Inequality; Economic Growth; Public Sector Economics&Finance;
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.:
- Easterly, William R., 1989.
"Policy distortions, size of government, and growth,"
Policy Research Working Paper Series
344, The World Bank.
- William Easterly, 1989. "Policy Distortions, Size of Government, and Growth," NBER Working Papers 3214, National Bureau of Economic Research, Inc.
- Barro, Robert J, 1981.
"Output Effects of Government Purchases,"
Journal of Political Economy, University of Chicago Press,
University of Chicago Press, vol. 89(6), pages 1086-1121, December.
- Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, Elsevier, vol. 16(2), pages 141-163, September.
- Levine, Ross & Renelt, David, 1991.
"A sensitivity analysis of cross-country growth regressions,"
Policy Research Working Paper Series
609, The World Bank.
- Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, American Economic Association, vol. 82(4), pages 942-63, September.
- Aschauer, David Alan & Greenwood, Jeremy, 1985. "Macroeconomic effects of fiscal policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 23(1), pages 91-138, January.
- Catherine J. Morrison & Amy Ellen Schwartz, 1992.
"State Infrastructure and Productive Performance,"
NBER Working Papers
3981, National Bureau of Economic Research, Inc.
- Morrison, Catherine J & Schwartz, Amy Ellen, 1996. "State Infrastructure and Productive Performance," American Economic Review, American Economic Association, American Economic Association, vol. 86(5), pages 1095-1111, December.
- Shantayanan Devarajan & Danyang Xie & Heng-fu Zou, 1999.
"Should Public Capital Be Subsidized or Provided?,"
CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics
75, China Economics and Management Academy, Central University of Finance and Economics.
- Armas, Enrique Blanco & Osorio, Camilo Gomez & Moreno-Dodson, Blanca & Abriningrum, Dwi Endah, 2012. "Agriculture public spending and growth in Indonesia," Policy Research Working Paper Series 5977, The World Bank.
- Torres Preciado, Víctor Hugo & Polanco Gaytán, Mayrén & Manzanares Rivera, José Luis, 2010.
"Diferencias en el ingreso per cápita regional e infraestructura de transporte en México
[Differences in per capita regional income and transport infrastructure in Mexico]," MPRA Paper 28081, University Library of Munich, Germany.
- Pillai N., Vijayamohanan, 2008. "Infrastructure, Growth And Human Development In Kerala," MPRA Paper 7017, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.