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Fiscal Policy and Economic Development

  • Alex Mourmouras
  • Peter Rangazas
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    This paper offers possible explanations for three generally observed facts about fiscal policy and development: (F1) The relative size of government increases as an economy develops, (F2) The rise in government and taxation are associated with rising or constant economic growth rates, and (F3) Today's developing countries have larger government sectors than did today's developed countries at similar stages of development. The explanations for these facts are based on the structural transformation from traditional (mostly agricultural) to modern (industrial and post-industrial) production, rising public infrastructure investment, and less representative governments in many of today's developing economies.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=21950
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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/155.

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    Length: 33
    Date of creation: 01 Jun 2008
    Date of revision:
    Handle: RePEc:imf:imfwpa:08/155
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    1. Oded Galor & Omer Moav & Dietrich Vollrath, 2009. "Inequality in Landownership, the Emergence of Human-Capital Promoting Institutions, and the Great Divergence," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 143-179.
    2. Peter Rangazas, 2002. "The Quantity and Quality of Schooling and U.S. Labor Productivity Growth (1870-2000)," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(4), pages 932-964, October.
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    6. Francesco Caselli & James Feyrer, 2005. "The Marginal Product of Capital," NBER Working Papers 11551, National Bureau of Economic Research, Inc.
    7. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    8. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
    9. Andrew Atkeson & V.V. Chari & Patrick J. Kehoe, 1999. "Taxing capital income: a bad idea," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 3-17.
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    11. Gary D. Hansen & Edward C. Prescott, 1999. "Malthus to Solow," Staff Report 257, Federal Reserve Bank of Minneapolis.
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    13. Lennart Erickson & Dietrich Vollrath, 2004. "Dimensions of Land Inequality and Economic Development," IMF Working Papers 04/158, International Monetary Fund.
    14. Ananth Seshadri & Rodolfo Manuelli, 2005. "Human Capital and the Wealth of Nations," 2005 Meeting Papers 56, Society for Economic Dynamics.
    15. Oded Galor & Omer Moav & Dietrich Vollrath, 2006. "Inequality in Land Ownership, the Emergence of Human Capital Promoting Institutions, and Great Divergence," Working Papers 2006-14, Brown University, Department of Economics.
    16. Daron Acemoglu & Simon Johnson & James Robinson, 2004. "Institutions as the Fundamental Cause of Long-Run Growth," NBER Working Papers 10481, National Bureau of Economic Research, Inc.
    17. Acemoglu, Daron & Johnson, Simon & Robinson, James A & Yared, Pierre, 2005. "Income and Democracy," CEPR Discussion Papers 5273, C.E.P.R. Discussion Papers.
    18. Roger Gordon & Wei Li, 2005. "Tax Structure in Developing Countries: Many Puzzles and a Possible Explanation," NBER Working Papers 11267, National Bureau of Economic Research, Inc.
    19. Burgess, Robin & Stern, Nicholas, 1993. "Taxation and Development," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 762-830, June.
    20. Richard H. Clarida, 1993. "International Capital Mobility, Public Investment and Economic Growth," NBER Working Papers 4506, National Bureau of Economic Research, Inc.
    21. Fumio Hayashi & Edward C. Prescott, 2008. "The Depressing Effect of Agricultural Institutions on the Prewar Japanese Economy," Journal of Political Economy, University of Chicago Press, vol. 116(4), pages 573-632, 08.
    22. Loayza, Norman V., 1996. "The economics of the informal sector: a simple model and some empirical evidence from Latin America," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 129-162, December.
    23. Sam Peltzman, 1980. "The Growth of Government," University of Chicago - George G. Stigler Center for Study of Economy and State 1, Chicago - Center for Study of Economy and State.
    24. Maddison, Angus, 1994. "Economic Growth and Standards of Living in the Twentieth Century," GGDC Research Memorandum 199415, Groningen Growth and Development Centre, University of Groningen.
    25. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472 Elsevier.
    26. Glomm, Gerhard & Ravikumar, B., 1997. "Productive government expenditures and long-run growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 183-204, January.
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