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Economic growth and budgetary components: a panel assessment for the EU

  • António Afonso

    ()

  • Juan Alegre

    ()

In this paper we test whether a reallocation of government budget items can enhance long-term GDP growth in a set of European countries. We apply modern panel data techniques to the period 1970-2006, and we use three alternative dependent variables in a growth regression: economic growth, total factor productivity and labour productivity. Our results are able to identify also the distortions induced by public expenditure in the private factors allocation. In particular, we detect a strong crowding-in effect associated to public investment, which have enhanced economic growth by boosting private investment. We also associate a significant dependence of productivity on public expenditure on education as well as the role of social security and health issues in growth and the labour market. JEL Classification: C23, E62, H50, O40

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File URL: http://hdl.handle.net/10.1007/s00181-010-0400-9
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Article provided by Springer in its journal Empirical Economics.

Volume (Year): 41 (2011)
Issue (Month): 3 (December)
Pages: 703-723

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Handle: RePEc:spr:empeco:v:41:y:2011:i:3:p:703-723
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