Fiscal Policy and Growth in the OECD
This paper investigates the impact of public expenditures and taxation on economic growth using panel data for a sample of OECD countries. The empirical results suggest that fiscal policy influences growth through three main channels. First, the government contributes directly to factor accumulation through public investment in infrastructure and other assets. Second, public expenditure tends to crowd out private investment by reducing disposable income and the incentive to save. Third, there is evidence of a sizeable negative ‘externality’ effect of government on the level of productivity. According to the estimates, the effective cost of $1 of public expenditure is around $1.3 once the relevant distortions are taken into account. While this figure is viewed as an upper bound, it does suggest that taxes and public expenditures generate significant efficiency costs which should be taken into account when making budget decisions.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Dec 1997|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:1755. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.