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Does Government Expenditure Matter for Economic Growth?

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  • Marion Laboure
  • Emmanuelle Taugourdeau

Abstract

This paper aims to determine how the composition of public expenditure affects countries’ economic growth depending on their level of development. We show that there is a strong association between a country's level of development and the amount of public spending. Productive spending dominates in poorer countries while richer countries have a higher proportion of unproductive spending. Furthermore, productive spending has a greater effect on growth in poorer countries. We illustrate our findings using dynamic panel GMM estimators with data from 147 countries (31 low, 69 medium and 47 high†income countries) covering the period 1970–2008. We also find that education expenditures are the more productive public spending.

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  • Marion Laboure & Emmanuelle Taugourdeau, 2018. "Does Government Expenditure Matter for Economic Growth?," Global Policy, London School of Economics and Political Science, vol. 9(2), pages 203-215, May.
    • Handle: RePEc:bla:glopol:v:9:y:2018:i:2:p:203-215
    DOI: 10.1111/1758-5899.12540
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    Cited by:

    1. Shvets, Serhii, 2020. "The golden rule of public finance under active monetary stance: endogenous setting for a developing economy," MPRA Paper 101232, University Library of Munich, Germany.
    2. Luca Romagnoli & Paola Di Renzo & Luigi Mastronardi, 2022. "Modelling Income Drivers in Peripheral Municipalities: The Case of Italian Inner Areas," Sustainability, MDPI, vol. 14(22), pages 1-16, November.

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