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Economic Growth And Public Expenditure Composition: Optimal Adjustment Using The Gradient Method

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  • TATSUYOSHI MIYAKOSHI
  • YOSHIHIKO TSUKUDA
  • TATSUHITO KONO
  • MAKOTO KOYANAGI

Abstract

Previous studies have looked at how the components of fiscal spending affect economic growth. However, we explicitly enquire into how to adjust the components in order to achieve the highest rate of economic growth starting from the present shares of components, by introducing a gradient method. The resulting optimal adjustment shares are proportional to the deviations from the average over elements of a gradient vector. The optimal adjustment share is completely estimated by using linear regression with any choice of omitted variable. The paper also provides an illustrative example taken from the annual panel data for the Japanese prefectural governments.

Suggested Citation

  • Tatsuyoshi Miyakoshi & Yoshihiko Tsukuda & Tatsuhito Kono & Makoto Koyanagi, 2010. "Economic Growth And Public Expenditure Composition: Optimal Adjustment Using The Gradient Method," The Japanese Economic Review, Japanese Economic Association, vol. 61(3), pages 320-340, September.
    • Handle: RePEc:bla:jecrev:v:61:y:2010:i:3:p:320-340
    DOI: 10.1111/j.1468-5876.2009.00493.x
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    References listed on IDEAS

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    Cited by:

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    2. Awaworyi Churchill, Sefa & Yew, Siew Ling & Ugur, Mehmet, 2015. "Effects of Government Education and Health Expenditures on Economic Growth: A Meta-analysis," EconStor Preprints 110901, ZBW - Leibniz Information Centre for Economics.
    3. Dincă Marius Sorin & Dincă Gheorghița, 2013. "The Impact of Government Expenditures upon Economic Growth in Post-Communist Countries," Scientific Annals of Economics and Business, Sciendo, vol. 60(1), pages 126-134, July.

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