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The composition of public expenditure and growth : a small-scale intertemporal model for low-income countries

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  • Bayraktar, Nihal
  • Moreira, Emmanuel Pinto
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    Abstract

    This paper presents a small-scale intertemporal model of endogenous growth that accounts for the composition of public expenditure and externalities associated with public capital. Government spending is disaggregated into various components, including maintenance, security, and investment in education, health, and core infrastructure. After studying its long-run properties, the model is calibrated for Haiti, using country-specific information as well as parameter estimates from the literature. A variety of policy experiments are then reported, including a reallocation of spending aimed at creating fiscal space to promote public investment; an improvement in fiscal management that leads to a reduction in tax collection costs; higher spending on security; and a composite fiscal package.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4430.

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    Date of creation: 01 Dec 2007
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    Handle: RePEc:wbk:wbrwps:4430

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    Related research

    Keywords: ; Debt Markets; Economic Theory&Research; Public Sector Economics&Finance; Public Sector Expenditure Analysis&Management;

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    1. Kam, Eric, 2005. "A note on time preference and the Tobin Effect," Economics Letters, Elsevier, Elsevier, vol. 89(1), pages 127-132, October.
    2. Gilbert Colletaz & Christophe Hurlin, 2006. "Threshold Effects of the Public Capital Productivity : An International Panel Smooth Transition Approach," Working Papers halshs-00008056, HAL.
    3. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(1), pages 54-77, February.
    4. Alonso-Carrera, Jaime & Freire-Seren, Maria Jesus, 2004. "Multiple equilibria, fiscal policy, and human capital accumulation," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 28(4), pages 841-856, January.
    5. Agénor, Pierre-Richard & Bayraktar, Nihal & El Aynaoui, Karim, 2008. "Roads out of poverty? Assessing the links between aid, public investment, growth, and poverty reduction," Journal of Development Economics, Elsevier, Elsevier, vol. 86(2), pages 277-295, June.
    6. Pierre‐Richard Agénor & Kyriakos C. Neanidis, 2011. "The Allocation Of Public Expenditure And Economic Growth," Manchester School, University of Manchester, vol. 79(4), pages 899-931, 07.
    7. Reinhart, Carmen & Ogaki, Masao & Ostry, Jonathan, 1995. "Saving behavior in low- and middle-income developing countries," MPRA Paper 13757, University Library of Munich, Germany.
    8. Naoko C. Kojo & Arye L. Hillman & Emanuele Baldacci, 2003. "Growth, Governance, and Fiscal Policy Transmission Channels in Low-Income Countries," IMF Working Papers 03/237, International Monetary Fund.
    9. Canton, E.J.F., 1997. "Fiscal Policy in a Stochastic Model of Endogenous Growth," Discussion Paper, Tilburg University, Center for Economic Research 1997-63, Tilburg University, Center for Economic Research.
    10. Charles R. Hulten, 1996. "Infrastructure Capital and Economic Growth: How Well You Use It May Be More Important Than How Much You Have," NBER Working Papers 5847, National Bureau of Economic Research, Inc.
    11. Van de Walle, D., 1996. "Infrastructure and Poverty in Vietnam," Papers, World Bank - Living Standards Measurement 121, World Bank - Living Standards Measurement.
    12. Bird, Richard M. & Zolt, Eric M., 2005. "The limited role of the personal income tax in developing countries," Journal of Asian Economics, Elsevier, Elsevier, vol. 16(6), pages 928-946, December.
    13. Canning, David, 1999. "Infrastructure's contribution to aggregate output," Policy Research Working Paper Series 2246, The World Bank.
    14. Perli, Roberto & Sakellaris, Plutarchos, 1998. "Human capital formation and business cycle persistence," Journal of Monetary Economics, Elsevier, Elsevier, vol. 42(1), pages 67-92, June.
    15. Chen, Hung-ju, 2005. "Educational systems, growth and income distribution: a quantitative study," Journal of Development Economics, Elsevier, Elsevier, vol. 76(2), pages 325-353, April.
    16. Esfahani, Hadi Salehi & Ramirez, Maria Teresa, 2003. "Institutions, infrastructure, and economic growth," Journal of Development Economics, Elsevier, Elsevier, vol. 70(2), pages 443-477, April.
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    Cited by:
    1. Emmanuel Pinto Moreira, 2009. "Linking Fiscal Policy and Growth in PER Reports : An Operational Framework for Low-Income Countries," World Bank Other Operational Studies 11125, The World Bank.

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