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Economic Determinants of Government Subsidies

Author

Listed:
  • Benedict J. Clements
  • Hugo Rodríguez
  • Gerd Schwartz

Abstract

The paper studies the economic determinants of government subsidies using panel data for 40 countries over 18 years (from 1975 to 1992) and finds that individual country-specific factors play a sizeable role in determining government subsidies. But it also suggests several characteristics—a small government, a small external current account deficit, and a productive structure geared more toward services and agriculture than manufacturing—may make it easier to keep subsidy expenditures down. The paper also suggests that globalization and the associated increase in openness are not impediments to reducing subsidies. In itself, an IMF-supported adjustment program is found not to be a significant determinant of government subsidy expenditures.

Suggested Citation

  • Benedict J. Clements & Hugo Rodríguez & Gerd Schwartz, 1998. "Economic Determinants of Government Subsidies," IMF Working Papers 98/166, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:98/166
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    Cited by:

    1. Ismael Sanz & Francisco Javier Velázquez, 2002. "Determinants of the Composition of Government Expenditure by Functions," European Economy Group Working Papers 13, European Economy Group.
    2. Nulsch, Nicole, 2014. "Is Subsidizing Companies in Difficulties an Optimal Policy? An Empirical Study on the Effectiveness of State Aid in the European Union," IWH Discussion Papers 9/2014, Halle Institute for Economic Research (IWH).
    3. repec:ebl:ecbull:v:8:y:2007:i:4:p:1-7 is not listed on IDEAS
    4. Venetoklis, Takis, 2001. "Business Subsidies and Bureaucratic Behaviour," Research Reports 79, VATT Institute for Economic Research.
    5. Koeniger, Winfried, 2001. "Trade, Labor Market Rigidities, and Government-Financed Technological Change," IZA Discussion Papers 241, Institute for the Study of Labor (IZA).
    6. Venetoklis, Takis, 2001. "Business Subsidies and Bureaucratic Behaviour - A Revised Approach," Research Reports 83, VATT Institute for Economic Research.
    7. Julian Ramajo & Javier Salinas & Francisco Pedraja & Miguel Márquez, 2007. "Competition in the allocation of public spending: a new model to analyse the interaction between expenditure categories," Economics Bulletin, AccessEcon, vol. 8(4), pages 1-7.

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