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The effects of public spending composition on firm productivity

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  • Kneller, Richard
  • Misch, Florian

Abstract

This paper exploits the unique institutional features of South Africa to estimate the impact of provincial public spending on health, education and transport on firm productivity. Our identification strategy is based on within industry-province differences between firms of the effects of public spending. We show that public spending composition affects firm productivity depending on the capital intensity of firms relative to the province-industry mean. Our data and empirical specification allow us to rule out that these results are affected by econometric problems that are commonly encountered when estimating the effects of fiscal policy and by unobserved industry- or province-specific productivity shocks. In contrast to related existing microeconomic evidence, we take into account the government budget constraint so that our results have clear policy implications. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 13-014.

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Date of creation: 2013
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Handle: RePEc:zbw:zewdip:13014

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Keywords: Public Spending Composition; Productive Public Spending; Firm Productivity;

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  1. Gabe, Todd M., 2003. "Local Fiscal Policy and Establishment Growth," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 33(1).
  2. Arnold, Jens Matthias & Mattoo, Aaditya & Narciso, Gaia, 2006. "Services inputs and firm productivity in Sub-Saharan Africa : evidence from firm-level data," Policy Research Working Paper Series 4048, The World Bank.
  3. Cyrille Schwellnus & Jens Arnold, 2008. "Do Corporate Taxes Reduce Productivity and Investment at the Firm Level?: Cross-Country Evidence from the Amadeus Dataset," OECD Economics Department Working Papers 641, OECD Publishing.
  4. Jean-Jacques Dethier & Maximilian Hirn & Stéphane Straub, 2011. "Explaining Enterprise Performance in Developing Countries with Business Climate Survey Data," World Bank Research Observer, World Bank Group, vol. 26(2), pages 258-309, August.
  5. Norman Gemmell & Florian Misch & Blanca Moreno-Dodson, 2012. "Public Spending for Long-Run Growth : A Practitioners' View," World Bank Other Operational Studies 17061, The World Bank.
  6. Reinikka, Ritva & Svensson, Jakob, 2002. "Coping with poor public capital," Journal of Development Economics, Elsevier, vol. 69(1), pages 51-69, October.
  7. Kevin Hjortshøj O'Rourke & Richard S. Grossman & Madalina A. Ursu, 2013. "A monthly stock exchange index for Ireland, 1864-1930," Economics Series Working Papers 120, University of Oxford, Department of Economics.
  8. Gabor Bekes & Balazs Murakozy, 2005. "Firm behaviour and public infrastructure - The Case of Hungary," IEHAS Discussion Papers 0504, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
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