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Public finance and economic development

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  • Balassa, Bela
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    Abstract

    This paper reports on tests of alternative hypotheses as to the effects of a budget deficit, examines the influence of the size of the government on economic growth, and investigates the impact of public investment on private investment, total investment, and economic growth. The findings have important implications for the developing countries. They show that budget deficits have adverse effects on the balance of payments as well as on domestic investment. It further appears that increases in government consumption adversely affect economic growth. Finally, increases in public investment not only crowd out private investment but tend to lower the efficiency of investment, with adverse effects on economic growth. The conclusions point to the need for reducing budget deficits in developing countries. They further favor lowering government consumption as well as public investment in these countries.

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    File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/1988/08/01/000009265_3960927021107/Rendered/PDF/multi_page.pdf
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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 31.

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    Date of creation: 31 Aug 1988
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    Handle: RePEc:wbk:wbrwps:31

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    Related research

    Keywords: Economic Stabilization; Economic Theory&Research; Environmental Economics&Policies; Macroeconomic Management; Achieving Shared Growth;

    References

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    1. Mario I. Blejer & Mohsin S. Khan, 1984. "Government Policy and Private Investment in Developing Countries (Politique des pouvoirs publics et investissement privé dans les pays en développement) (Política estatal e inversión priva," IMF Staff Papers, Palgrave Macmillan, vol. 31(2), pages 379-403, June.
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    Citations

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    Cited by:
    1. Balassa, Bela, 1990. "Indicative planning in developing countries," Policy Research Working Paper Series 439, The World Bank.
    2. Fischer, Stanley, 1989. "The economics of the government budget constraint," Policy Research Working Paper Series 224, The World Bank.
    3. Marie-Ange VEGANZONES-VAROUDAKIS & PANG & Ahmet Faruk AYSAN, 2006. "Assessing the Responsiveness of Private Investment to Economic Reforms: The Case of MENA Countries," Working Papers 200623, CERDI.
    4. Linn, Johannes F. & Wetzel, Deborah L., 1989. "Public finance, trade, and development : what have we learned?," Policy Research Working Paper Series 181, The World Bank.
    5. Chhibber, Ajay & Khalilzadeh-Shirazi, Javad, 1988. "Public finance in adjustment programs," Policy Research Working Paper Series 128, The World Bank.
    6. Chhibber, Ajay & Dailami, Mansoor, 1990. "Fiscal policy and private investment in developing countries : recent evidence on key selected issues," Policy Research Working Paper Series 559, The World Bank.
    7. Stephen S. Everhart & Mariusz A. Sumlinski, 2001. "Trends in Private Investment in Developing Countries : Statistics for 1970-2000 and the Impact on Private Investment of Corruption and the Quality of Public Investment," World Bank Publications, The World Bank, number 13989, August.
    8. Shafik, Nemat, 1990. "Modeling investment behavior in developing countries : an application to Egypt," Policy Research Working Paper Series 452, The World Bank.

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