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Is Social Spending Procyclical? Evidence for Developing Countries

  • Arze del Granado, Javier
  • Gupta, Sanjeev
  • Hajdenberg, Alejandro
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    This paper studies the cyclical behavior of public spending on health and education in 145 countries during 1987–2007. It finds that spending on education and health is procyclical in developing countries and acyclical in developed countries. In addition, education and health expenditures follow an asymmetric pattern in developing countries; they are procyclical during periods of positive output gap and acyclical during periods of negative output gap. Furthermore, the degree of cyclicality is higher the lower the level of economic development.

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    Article provided by Elsevier in its journal World Development.

    Volume (Year): 42 (2013)
    Issue (Month): C ()
    Pages: 16-27

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    Handle: RePEc:eee:wdevel:v:42:y:2013:i:c:p:16-27
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    1. Richard Blundell & Steve Bond, 1999. "GMM estimation with persistent panel data: an application to production functions," IFS Working Papers W99/04, Institute for Fiscal Studies.
    2. Roberto Perotti, 1999. "Fiscal Policy in Good Times and Bad," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1399-1436.
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    8. Reinhart, Carmen & Kaminsky, Graciela & Vegh, Carlos, 2004. "When it rains, it pours: Procyclical capital flows and macroeconomic policies," MPRA Paper 13883, University Library of Munich, Germany.
    9. Ernesto Talvi & Carlos A. Vegh, 2000. "Tax Base Variability and Procyclical Fiscal Policy," NBER Working Papers 7499, National Bureau of Economic Research, Inc.
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    12. Fabrizio Balassone & Maura Francese & Stefania Zotteri, 2010. "Cyclical asymmetry in fiscal variables in the EU," Empirica, Springer, vol. 37(4), pages 381-402, November.
    13. Zvi Hercowitz & Michel Strawczynski, 2004. "Cyclical Ratcheting in Government Spending: Evidence from the OECD," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 353-361, February.
    14. Ugo Panizza & Dany Jaimovich, 2007. "Procyclicality or Reverse Causality?," IDB Publications (Working Papers) 6843, Inter-American Development Bank.
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    17. Akitoby, Bernardin & Clements, Benedict & Gupta, Sanjeev & Inchauste, Gabriela, 2006. "Public spending, voracity, and Wagner's law in developing countries," European Journal of Political Economy, Elsevier, vol. 22(4), pages 908-924, December.
    18. Ethan Ilzetzki & Carlos A. Vegh, 2008. "Procyclical Fiscal Policy in Developing Countries: Truth or Fiction?," NBER Working Papers 14191, National Bureau of Economic Research, Inc.
    19. Enrique G. Mendoza & P. Marcelo Oviedo, 2006. "Fiscal Policy and Macroeconomic Uncertainty in Developing Countries: The Tale of the Tormented Insurer," NBER Working Papers 12586, National Bureau of Economic Research, Inc.
    20. repec:oup:qjecon:v:114:y:1999:i:4:p:1399-1436 is not listed on IDEAS
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