IDEAS home Printed from https://ideas.repec.org/a/sae/jothpo/v2y1990i2p173-204.html
   My bibliography  Save this article

The Impact of Government Spending Levels on Medium-Term Economic Growth in the Oecd, 1960-85

Author

Listed:
  • Francis G. Castles
  • Steve Dowrick

Abstract

Recent findings concerning the impact of government spending on economic growth have been as diverse as the theories underpinning them. Proceeding from a methodological critique of prior work in the field and drawing on a variety of methodological innovations suggested in recent studies, we seek to design rigorous tests using cross-section data from 18 OECD countries over four business cycles between 1960 and 1985. Government expenditure is decomposed into various categories and economic growth is corrected for cyclical disturbances. We also control for the effects of technological catch-up, institutional sclerosis and population growth along with the mediating influences of investment and employment. A variety of diagnostic statistical tests are applied, including tests for parameter stability across countries and across periods and tests for heteroscedasticity, functional form, outliers and endogeneity. We reject the hypothesis that government expenditures reduce economic growth and indicate some areas of social expenditures which may possibly tend to increase growth. We are also able to indicate the methodological assumptions and restrictions which have led to previous contrary findings.

Suggested Citation

  • Francis G. Castles & Steve Dowrick, 1990. "The Impact of Government Spending Levels on Medium-Term Economic Growth in the Oecd, 1960-85," Journal of Theoretical Politics, , vol. 2(2), pages 173-204, April.
    • Handle: RePEc:sae:jothpo:v:2:y:1990:i:2:p:173-204
    DOI: 10.1177/0951692890002002003
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0951692890002002003
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0951692890002002003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Stiglitz, Joseph E, 1987. "The Causes and Consequences of the Dependence of Quality on Price," Journal of Economic Literature, American Economic Association, vol. 25(1), pages 1-48, March.
    2. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
    3. John J. Beggs, 1988. "Diagnostic Testing in Applied Econometrics," The Economic Record, The Economic Society of Australia, vol. 64(2), pages 81-101, June.
    4. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, vol. 76(5), pages 1072-1085, December.
    5. Cameron, David R., 1978. "The Expansion of the Public Economy: A Comparative Analysis," American Political Science Review, Cambridge University Press, vol. 72(4), pages 1243-1261, December.
    6. Abramovitz, Moses, 1986. "Catching Up, Forging Ahead, and Falling Behind," The Journal of Economic History, Cambridge University Press, vol. 46(2), pages 385-406, June.
    7. Ram, Rati, 1986. "Government Size and Economic Growth: A New Framework and Some Evidencefrom Cross-Section and Time-Series Data," American Economic Review, American Economic Association, vol. 76(1), pages 191-203, March.
    8. Gray, Virginia & Lowery, David, 1988. "Interest Group Politics and Economic Growth in the U.S. States," American Political Science Review, Cambridge University Press, vol. 82(1), pages 109-131, March.
    9. Beggs, John J, 1988. "Diagnostic Testing in Applied Econometrics," The Economic Record, The Economic Society of Australia, vol. 64(185), pages 81-101, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kneller, Richard, 2000. "The Implications of the Comprehensive Spending Review for the Long-Run Growth Rate: a View From the Literature," National Institute Economic Review, National Institute of Economic and Social Research, vol. 171, pages 94-105, January.
    2. Etayankara Muralidharan & Saurav Pathak, 2018. "Sustainability, Transformational Leadership, and Social Entrepreneurship," Sustainability, MDPI, vol. 10(2), pages 1-22, February.
    3. Huo, Jingjing, 2015. "How Nations Innovate: The Political Economy of Technological Innovation in Affluent Capitalist Economies," OUP Catalogue, Oxford University Press, number 9780198735847.
    4. Frank Castles, 1999. "Decentralization and the Post-War Political Economy," CEPR Discussion Papers 399, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    5. Cusack, Thomas R., 1995. "Politics and macroeconomic performance in the OECD countries," Discussion Papers, Research Unit: Economic Change and Employment FS I 95-315, WZB Berlin Social Science Center.
    6. Erich Weede, 1991. "The impact of state power on economic growth rates in OECD countries," Quality & Quantity: International Journal of Methodology, Springer, vol. 25(4), pages 421-438, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brander, James A & Dowrick, Steve, 1994. "The Role of Fertility and Population in Economic Growth: Empirical Results from Aggregate Cross-National Data," Journal of Population Economics, Springer;European Society for Population Economics, vol. 7(1), pages 1-25.
    2. Crihfield, John B. & Giertz, J. Fred & Mehta, Shekhar, 1995. "Economic growth in the American states: The end of convergence?," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(35), pages 551-577.
    3. Paul Johnson & Chris Papageorgiou, 2020. "What Remains of Cross-Country Convergence?," Journal of Economic Literature, American Economic Association, vol. 58(1), pages 129-175, March.
    4. McAleer, Michael, 1995. "The significance of testing empirical non-nested models," Journal of Econometrics, Elsevier, vol. 67(1), pages 149-171, May.
    5. Raul A. Barreto & Anthony W. Hughes, 2004. "Under Performers and Over Achievers: A Quantile Regression Analysis of Growth," The Economic Record, The Economic Society of Australia, vol. 80(248), pages 17-35, March.
    6. N. Kakwani, 1995. "Structural Adjustment and Performance in Living Standards in Developing Countries," Development and Change, International Institute of Social Studies, vol. 26(3), pages 469-502, July.
    7. Beugelsdijk, S. & van Schaik, A.B.T.M., 2001. "Social Capital and Regional Economic Growth," Other publications TiSEM 874f4bc4-bef9-499c-829e-0, Tilburg University, School of Economics and Management.
    8. Alan M. Taylor, 1996. "On the Costs of Inward-Looking Development: Historical Perspectives on Price Distortions, Growth, and Divergence in Latin American from 1930s - 1980s," NBER Working Papers 5432, National Bureau of Economic Research, Inc.
    9. Heitger, Bernhard, 1989. "Wachstumswirkungen von Steuern und Staatsausgaben," Kiel Discussion Papers 148, Kiel Institute for the World Economy (IfW Kiel).
    10. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
    11. Agnieszka Głodowska & Bożena Pera, 2019. "On the Relationship between Economic Integration, Business Environment and Real Convergence: The Experience of the CEE Countries," Economies, MDPI, vol. 7(2), pages 1-19, June.
    12. Glismann, Hans H. & Horn, Ernst-Jürgen & Schrader, Klaus, 1993. "Wohlfahrtseffekte von Rüstungs- und Raumfahrtausgaben: Das Beispiel der Vereinigten Staaten," Open Access Publications from Kiel Institute for the World Economy 783, Kiel Institute for the World Economy (IfW Kiel).
    13. Beugelsdijk, Sjoerd & van Schaik, Ton, 2005. "Social capital and growth in European regions: an empirical test," European Journal of Political Economy, Elsevier, vol. 21(2), pages 301-324, June.
    14. Alan M. Taylor, 1995. "Growth and Convergence in the Asia-Pacific Region: On the Role of Openness, Trade and Migration," NBER Working Papers 5276, National Bureau of Economic Research, Inc.
    15. Souzanchi Kashani, Ebrahim & Radosevic, Slavo & Kiamehr, Mehdi & Gholizadeh, Hossein, 2022. "The intellectual evolution of the technological catch-up literature: Bibliometric analysis," Research Policy, Elsevier, vol. 51(7).
    16. Andersson, Fredrik N.G. & Edgerton, David L. & Opper, Sonja, 2013. "A Matter of Time: Revisiting Growth Convergence in China," World Development, Elsevier, vol. 45(C), pages 239-251.
    17. repec:use:tkiwps:3232 is not listed on IDEAS
    18. ?gel de la Fuente, "undated". "Convergence Across Countries And Regions: Theory And Empirics," UFAE and IAE Working Papers 447.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    19. Miketa, Asami & Mulder, Peter, 2005. "Energy productivity across developed and developing countries in 10 manufacturing sectors: Patterns of growth and convergence," Energy Economics, Elsevier, vol. 27(3), pages 429-453, May.
    20. Somesh Kumar Mathur, 2005. "Absolute and Conditional Convergence: Its Speed for Selected Countries for 1961--2001," Macroeconomics 0510023, University Library of Munich, Germany.
    21. Carolina Arteaga Cabrales, 2011. "Human Capital Externalities and Growth," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 29(66), pages 12-47, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:jothpo:v:2:y:1990:i:2:p:173-204. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.