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The Fiscal-Growth Nexus

  • António Afonso
  • João Tovar Jalles

We assess the fiscal-growth nexus with a large country panel, accounting for the usually encountered econometric pitfalls. Our results show that revenues have no significant impact on growth whereas expenditures have negative effects. The same is true for the OECD with the addition that government revenue has a negative impact on growth. Taxes on income are usually detrimental to growth, as well as public wages, interest payments, subsidies and government consumption have a negative effect on growth. Social spending is detrimental to growth; spending on education and health boosts growth; and there is weak evidence supporting causality running from expenditures and revenues to output and TFP.

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File URL: http://pascal.iseg.utl.pt/~depeco/wp/wp012012.pdf
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Paper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2012/01.

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Date of creation: Jan 2012
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Handle: RePEc:ise:isegwp:wp012012
Contact details of provider: Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC

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  28. Mark Hallerberg & Rolf Strauch, 2002. "On the Cyclicality of Public Finances in Europe," Empirica, Springer, vol. 29(3), pages 183-207, September.
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  30. Huang, Yongfu & Temple, Jonathan, 2005. "Does External Trade Promote Financial Development?," CEPR Discussion Papers 5150, C.E.P.R. Discussion Papers.
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