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Productivity of Public Spending, Sectoral Allocation Choices, and Economic Growth

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  • Baffes, John
  • Shah, Anwar

Abstract

The authors examine the composition of public spending and its implications for economic growth. They use a translog production function by treating gross domestic product as the output and labor, private capital, and several types of public sector capital stocks as the inputs, using time series data for 25 countries for 1965-84. The production functions of all but four countries exhibited increasing returns to scale. The highest output elasticity was for human resource development capital, followed by private capital and labor. Output elasticity of infrastructure capital was found to be relatively small, with the exception of Latin American countries where it exhibited relatively high values. Military capital had negative output elasticity in slightly more than half of the cases considered. The results suggest that reshaping public spending priorities in favor of human resource development and away from military spending would positively stimulate world economic renewal.
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  • Baffes, John & Shah, Anwar, 1998. "Productivity of Public Spending, Sectoral Allocation Choices, and Economic Growth," Economic Development and Cultural Change, University of Chicago Press, vol. 46(2), pages 291-303, January.
  • Handle: RePEc:ucp:ecdecc:v:46:y:1998:i:2:p:291-303
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    Cited by:

    1. W. Robert Reed & Nurul Sidek, 2013. "A Replication of "Meta-Analysis of the Effect of Fiscal Policies on Long-Run Growth" (European Journal of Political Economy, 2004)," Working Papers in Economics 13/33, University of Canterbury, Department of Economics and Finance.
    2. Nijkamp, Peter & Poot, Jacques, 2004. "Meta-analysis of the effect of fiscal policies on long-run growth," European Journal of Political Economy, Elsevier, vol. 20(1), pages 91-124, March.
    3. Peng, Ling & Hong, Yongmiao, 2013. "Productivity spillovers among linked sectors," China Economic Review, Elsevier, vol. 25(C), pages 44-61.
    4. repec:wyi:journl:002193 is not listed on IDEAS
    5. World Bank, 2003. "Argentina : Reforming Policies and Institutions for Efficiency and Equity of Public Expenditures," World Bank Other Operational Studies 14637, The World Bank.
    6. Wei Zou & Fen Zhang & Ziyin Zhuang & Hairong Song, 2008. "Transport Infrastructure, Growth, and Poverty Alleviation: Empirical Analysis of China," Annals of Economics and Finance, Society for AEF, vol. 9(2), pages 345-371, November.
    7. Fan, Shenggen & Chan-Kang, Connie, 2004. "Road development, economic growth, and poverty reduction in China," DSGD discussion papers 12, International Food Policy Research Institute (IFPRI).
    8. Pritchett, Lant, 1996. "Mind your P's and Q's : the cost of public investment is not the value of public capital," Policy Research Working Paper Series 1660, The World Bank.
    9. Peter Nijkamp & Jacques Poot, Victoria, 2002. "Meta-Analysis of the Impact of Fiscal Policies on Long-Run Growth," Tinbergen Institute Discussion Papers 02-028/3, Tinbergen Institute, revised 23 Apr 2003.
    10. Ferreira, Pedro Cavalcanti & Nascimento, Leandro Gonçalves do, 2005. "Welfare and growth effects of alternative fiscal rules for infrastructure investment in Brazil," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 604, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    11. Nauro F. Campos & Abrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 793-836, September.
    12. Randolph, Susan*Bogetic, Zeljko*Hefley, Dennis, 1996. "Determinants of public expenditure on infrastructure : transportation and communication," Policy Research Working Paper Series 1661, The World Bank.
    13. Swaroop, Vinaya & DEC, 1994. "The public finance of infrastructure : issues and options," Policy Research Working Paper Series 1288, The World Bank.
    14. Johannes Steinbrecher & Christian Thater & Marcel Thum & Oskar Krohmer, 2010. "Langfristige Prognose der Einnahmeentwicklung für den Landeshaushalt des Freistaates Sachsen bis zum Jahr 2025 : Gutachten im Auftrag des Sächsischen Staatsministeriums der Finanzen," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 57, October.
    15. Ahmed, Sadiq & Ranjan, Priya, 1995. "Promoting growth in Sri Lanka : lessons from East Asia," Policy Research Working Paper Series 1478, The World Bank.
    16. Rao, M. Govinda, 1998. "Accommodating public expenditure policies: the case of fast growing Asian economies," World Development, Elsevier, vol. 26(4), pages 673-694, April.
    17. Ahmed, Sadiq, 1994. "Explaining Pakistan's high growth performance over the past two decades : can it be sustained ?," Policy Research Working Paper Series 1341, The World Bank.
    18. Dimitrios Paparas & Christian Richter, 2015. "Fiscal policy and economic growth: Empirical evidence from the European Union," Working Papers 2015.06, International Network for Economic Research - INFER.
    19. Estache, Antonio & Foster, Vivien & Wodon, Quentin, 2002. "Making infrastructure reform in Latin America work for the poor," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    20. Celal Kucuker, 2003. "Türkiye Ýktisat Kongresi Büyüme Stratejileri Çalýþma Grubu," Working Papers 2003/5, Turkish Economic Association.
    21. Poot, Jacques, 1999. "A meta-analytic study of the role of government in long-run economic growth," ERSA conference papers ersa99pa171, European Regional Science Association.

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