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Productive Government Expenditure and Economic Growth

  • Andreas Irmen

    ()

    (University of Heidelberg, Department of Economics)

  • Johanna Kühnel

    ()

    (University of Heidelberg, Department of Economics)

We provide a comprehensive survey of the recent literature on the link between productive government expenditure and economic growth. Starting with the seminal paper of Robert Barro (1990) we show that an understanding of the core results of the ensuing contributions can be gained from the study of their respective Euler equations. We argue that the existing literature incorporates many relevant aspects, however, policy recommen- dations tend to hinge on several knife-edge assumptions. Therefore, future research ought to focus more on idea-based endogenous growth models to check the robustness of policy recommendations. Moreover, the inclusion of hitherto unexplored types of government expenditure, e. g., on the "rule of law", would be desirable.

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Paper provided by University of Heidelberg, Department of Economics in its series Working Papers with number 0464.

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Length: 48 pages
Date of creation: May 2008
Date of revision: May 2008
Handle: RePEc:awi:wpaper:0464
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