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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. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
    2. Burgess, Robin & Stern, Nicholas, 1993. "Taxation and Development," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 762-830, June.
    3. 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.
    4. Acemoglu, Daron & Johnson, Simon & Robinson, James A & Yared, Pierre, 2005. "Income and Democracy," CEPR Discussion Papers 5273, C.E.P.R. Discussion Papers.
    5. 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.
    6. 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.
    7. Loayza, Norman A., 1997. "The economics of the informal sector : a simple model and some empirical evidence from Latin America," Policy Research Working Paper Series 1727, The World Bank.
    8. Francesco Caselli, 2007. "The Marginal Product of Capital," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 535-568, 05.
    9. 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.
    10. Schneider, Friedrich, 2004. "The Size of the Shadow Economies of 145 Countries all over the World: First Results over the Period 1999 to 2003," IZA Discussion Papers 1431, Institute for the Study of Labor (IZA).
    11. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    12. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," NBER Working Papers 10568, National Bureau of Economic Research, Inc.
    13. Fumio Hayashi & Edward C. Prescott, 2006. "The Depressing Effect of Agricultural Institutions on the Prewar Japanese Economy," NBER Working Papers 12081, National Bureau of Economic Research, Inc.
    14. 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.
    15. 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.
    16. Matthias Doepke, 2001. "Accounting for Fertility Decline During the Transition to Growth," UCLA Economics Working Papers 804, UCLA Department of Economics.
    17. Peltzman, Sam, 1980. "The Growth of Government," Journal of Law and Economics, University of Chicago Press, vol. 23(2), pages 209-87, October.
    18. Richard H. Clarida, 1993. "International Capital Mobility, Public Investment and Economic Growth," NBER Working Papers 4506, National Bureau of Economic Research, Inc.
    19. Lennart Erickson & Dietrich Vollrath, 2004. "Dimensions of Land Inequality and Economic Development," IMF Working Papers 04/158, International Monetary Fund.
    20. 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.
    21. repec:dgr:rugggd:199415 is not listed on IDEAS
    22. 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.
    23. Gary D. Hansen & Edward C. Prescott, 1999. "Malthus to Solow," Staff Report 257, Federal Reserve Bank of Minneapolis.
    24. Ananth Seshadri & Rodolfo Manuelli, 2005. "Human Capital and the Wealth of Nations," 2005 Meeting Papers 56, Society for Economic Dynamics.
    25. 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.
    26. Alston, Lee J. & Hatton, T. J., 1991. "The Earnings Gap Between Agricultural and Manufacturing Laborers, 1925–1941," The Journal of Economic History, Cambridge University Press, vol. 51(01), pages 83-99, March.
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