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Government Consumption and Growth

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  • Evans, Paul

Abstract

Using a simple stochastic growth model that nests both exogenous and endogenous growth, this paper shows that the growth rate should be mean stationary if growth is exogenous and difference stationary if growth is endogenous and any variable affecting investment is difference stationary. Permanent changes in the share of output devoted to government consumption should permanently affect the growth rate if, and only if, growth is endogenous. The author tests these implications and finds no evidence that growth is endogenous. Furthermore, even if growth is endogenous, the evidence indicates that its degree of endogeneity is likely to be small. Copyright 1997 by Oxford University Press.

Suggested Citation

  • Evans, Paul, 1997. "Government Consumption and Growth," Economic Inquiry, Western Economic Association International, vol. 35(2), pages 209-217, April.
    • Handle: RePEc:oup:ecinqu:v:35:y:1997:i:2:p:209-17
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    Cited by:

    1. Mark, Nelson C. & Sul, Donggyu, 2001. "Nominal exchange rates and monetary fundamentals: Evidence from a small post-Bretton woods panel," Journal of International Economics, Elsevier, vol. 53(1), pages 29-52, February.
    2. Zhu, Shengxiu & Oxley, Les, 2002. "New Zealand economic growth—endogenous or exogenous?," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 59(1), pages 125-131.
    3. Daniel G. Swaine, 1999. "Is the U.S. economy characterized by endogenous growth?: a time-series test of two stochastic growth models," Working Papers 99-9, Federal Reserve Bank of Boston.
    4. François Facchini & Mickael Melki, 2014. "Political Ideology And Economic Growth: Evidence From The French Democracy," Economic Inquiry, Western Economic Association International, vol. 52(4), pages 1408-1426, October.
    5. By Michael Funke & Ralf Ruhwedel, 2001. "Product Variety and Economic Growth: Empirical Evidence for the OECD Countries," IMF Staff Papers, Palgrave Macmillan, vol. 48(2), pages 1-1.
    6. François Facchini & Mickael Melki, 2014. "Political Ideology And Economic Growth: Evidence From The French Democracy," Economic Inquiry, Western Economic Association International, vol. 52(4), pages 1408-1426, October.
    7. Marc Tomljanovich, 2004. "The Role of State Fiscal Policy in State Economic Growth," Contemporary Economic Policy, Western Economic Association International, vol. 22(3), pages 318-330, July.
    8. Arlene Garces-Ozanne, 2006. "A bounds test approach to the study of level relationships in a panel of high-performing Asian economies (hpaes)," Working Papers 0607, University of Otago, Department of Economics, revised Nov 2006.
    9. Michael Funke & Ralf Ruhwedel, 2005. "Export variety and economic growth in East European transition economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 25-50, January.
    10. Ben Fine, 1998. "Endogenous Growth Theory: A Critical Assessment," Working Papers 80, Department of Economics, SOAS University of London, UK.
    11. Romero-Ávila, Diego & Strauch, Rolf, 2008. "Public finances and long-term growth in Europe: Evidence from a panel data analysis," European Journal of Political Economy, Elsevier, vol. 24(1), pages 172-191, March.
    12. Paul Evans, 1998. "Income Dynamics in Regions and Countries," Working Papers 98-09, Ohio State University, Department of Economics.
    13. Georgios Karras, 2006. "Foreign aid and long-run economic growth: empirical evidence for a panel of developing countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(1), pages 15-28.
    14. Karras Georgios, 2001. "Long-Run Economic Growth In Europe: Is It Endogenous Or Neoclassical?," International Economic Journal, Taylor & Francis Journals, vol. 15(2), pages 63-76, June.
    15. Georgios Karras, 1999. "Taxes And Growth: Testing The Neoclassical And Endogenous Growth Models," Contemporary Economic Policy, Western Economic Association International, vol. 17(2), pages 177-188, April.

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