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The structure of public spending and economic growth in Russia

Author

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  • Alexey Balaev

    (Economic Expert Group, Moscow, Russia
    Financial Research Institute, Moscow, Russia)

Abstract

This paper examines how Russia’s GDP growth responds to changes in the structure of general government spending. We consider models with expenditures as a percentage of total spending and expenditures as a percentage of GDP. Each model is constructed as a structural vector autoregression (SVAR). We show that redistribution in favor of productive expenditures (national economy, education, healthcare) increases the rate of economic growth, and an increase in the share of unproductive expenditures (national defense, social policy) reduces it. The maximum positive effect comes from expenditures on the national economy: their increase by 1% of GDP with constant total expenditures increases the growth rate of GDP by 1.1 p.p. An increase in expenditures on education by 1% of GDP with constant total expenses contributes +0.8 p.p. to the growth rate of GDP. The corresponding effect of healthcare expenditures is +0.1 p.p. Defense and social spending make negative contributions: –2.1 and –0.7 p.p. respectively. These results are consistent with existing estimates of fiscal multipliers for Russia and calculations based on data from other countries and cross-country data.

Suggested Citation

  • Alexey Balaev, 2019. "The structure of public spending and economic growth in Russia," Russian Journal of Economics, ARPHA Platform, vol. 5(2), pages 154-176, July.
    • Handle: RePEc:arh:jrujec:v:5:y:2019:i:2:p:154-176
    DOI: 10.32609/j.ruje.5.38705
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    References listed on IDEAS

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    Cited by:

    1. Gilbert Nartea & Jacqueline Hernandez, 2020. "Government Size, the Composition of Public Spending and Economic Growth in Netherland," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 9(2), pages 82-89.

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    More about this item

    Keywords

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    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H59 - Public Economics - - National Government Expenditures and Related Policies - - - Other

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