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Social Spending, Human Capital, and Growth in Developing Countries: Implications for Achieving the Mdgs

  • Emanuele Baldacci
  • Qiang Cui
  • Benedict J. Clements
  • Sanjeev Gupta
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    Using panel data from 120 developing countries from 1975 to 2000, this paper explores the direct and indirect channels linking social spending, human capital, and growth in a system of equations. The paper finds that both education and health spending have a positive and significant direct impact on the accumulation of education and health capital, and thus can lead to higher economic growth. The paper also finds that other policy interventions, such as improving governance, reducing excessive budget deficits, and taming inflation, can also be helpful in moving countries toward the Millennium Development Goals (MDGs). As such, higher spending alone is not sufficient to achieve the MDGs.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/217.

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    Length: 39
    Date of creation: 01 Nov 2004
    Date of revision:
    Handle: RePEc:imf:imfwpa:04/217
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    1. Pritchett, Lant & Summers, Lawrence H., 1993. "Wealthier is healthier," Policy Research Working Paper Series 1150, The World Bank.
    2. International Monetary Fund, 2002. "Moreon the Effectiveness of Public Spendingon Health Care and Education; A Covariance Structure Model," IMF Working Papers 02/90, International Monetary Fund.
    3. Naoko C. Kojo & Arye L. Hillman & Emanuele Baldacci, 2003. "Growth, Governance, and Fiscal Policy Transmission Channels in Low-Income Countries," IMF Working Papers 03/237, International Monetary Fund.
    4. Psacharopoulos, George, 1993. "Returns to investment in education : a global update," Policy Research Working Paper Series 1067, The World Bank.
    5. Bidani, Benu & Ravallion, Martin, 1995. "Decomposing social indicators using distributional data," Policy Research Working Paper Series 1487, The World Bank.
    6. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
    7. David Bloom & David Canning, 2003. "The Health and Poverty of Nations: From theory to practice," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 4(1), pages 47-71.
    8. Roman Arjona & Maxime Ladaique & Mark Pearson, 2001. "Growth, Inequality and Social Protection," OECD Labour Market and Social Policy Occasional Papers 51, OECD Publishing.
    9. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
    10. Gupta, Sanjeev & Clements, Benedict & Baldacci, Emanuele & Mulas-Granados, Carlos, 2005. "Fiscal policy, expenditure composition, and growth in low-income countries," Journal of International Money and Finance, Elsevier, vol. 24(3), pages 441-463, April.
    11. Bleaney, Michael F., 1996. "Macroeconomic stability, investment and growth in developing countries," Journal of Development Economics, Elsevier, vol. 48(2), pages 461-477, March.
    12. Robert J. Barro, 1996. "Determinants of Economic Growth: A Cross-Country Empirical Study," NBER Working Papers 5698, National Bureau of Economic Research, Inc.
    13. Alan Krueger & Mikael Lindahl, 2000. "Education for Growth: Why and For Whom?," Working Papers 808, Princeton University, Department of Economics, Industrial Relations Section..
    14. Fischer, Stanley, 1993. "The role of macroeconomic factors in growth," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 485-512, December.
    15. Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
    16. Barbara Sianesi & John Van Reenen, 2003. "The Returns to Education: Macroeconomics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 157-200, 04.
    17. Filmer, Deon & Hammer, Jeffrey & Pritchett, Lant, 1998. "Health policy in poor countries : weak links in the chain," Policy Research Working Paper Series 1874, The World Bank.
    18. Sudhir Anand & Martin Ravallion, 1993. "Human Development in Poor Countries: On the Role of Private Incomes and Public Services," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 133-150, Winter.
    19. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
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