Government Expenditures and Economic Growth: The Supply and Demand Sides
This paper uses a new approach to estimate how government expenditures affect the growth rate of real GDP. They affect the growth rate through three channels - total factor productivity, investment and aggregate demand. We find that apart from government investment, all government expenditures have negative marginal effects on productivity and GDP growth. In particular, a 1 percentage point increase in the share of government consumption in GDP reduces the equilibrium GDP growth rate by 0.216 percentage points, while the same increase in government investment raises the growth rate by 0.167 percentage points. This suggests that a reallocation of 1 percentage point of government consumption to government investment can raise the growth rate by 0.38 percentage points. Copyright 2007 Institute for Fiscal Studies.
Volume (Year): 28 (2007)
Issue (Month): 4 (December)
|Contact details of provider:|| Postal: |
Phone: (+44) 020 7291 4800
Fax: (+44) 020 7323 4780
Web page: http://www.ifs.org.uk
More information through EDIRC
|Order Information:|| Postal: The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE|
When requesting a correction, please mention this item's handle: RePEc:ifs:fistud:v:28:y:2007:i:4:p:497-522. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benita Rajania)
If references are entirely missing, you can add them using this form.