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The Role of Government in Capital Constrained Economies

Author

Listed:
  • Strauss, Tove

    (Dept. of Economics, Stockholm School of Economics)

Abstract

Is the role of government different in poor countries? We examine the government's role for growth in 40 LDCs with low infrastructure levels and limited access to capital. We consider both expenditure and financing aspects of government activity, but cannot conclude that governments in LDCs differ substantially from those with more efficient allocation mechanisms for private capital. However, we find that government consumption expenditure is a negative robust determinant of growth, emphasizing the importance of efficient allocation of government expenditure to reproductive investment. Although the debt-service ratio is not significant, increased public borrowing is a robust negative determinant of growth.

Suggested Citation

  • Strauss, Tove, 1997. "The Role of Government in Capital Constrained Economies," SSE/EFI Working Paper Series in Economics and Finance 215, Stockholm School of Economics.
    • Handle: RePEc:hhs:hastef:0215
    Note: This working paper is replaced by no. 275
    as

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    More about this item

    Keywords

    Growth; developing countries; government; public investment; public debt;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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