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Economic Growth and Budgetary Components: a Panel Assessment for the EU

  • António Afonso
  • Juan González Alegre

In this paper we test whether a reallocation of government budget items can enhance long-term GDP growth in a set of European countries. We apply modern panel data techniques to the period 1970-2006, and we use three alternative dependent variables in a growth regression: economic growth, total factor productivity and labour productivity. Our results are able to identify also the distortions induced by public expenditure in the private factors allocation. In particular, we detect a strong crowding-in effect associated to public investment, which have enhanced economic growth by boosting private investment. We also associate a significant dependence of productivity on public expenditure on education as well as the role of social security and health issues in growth and the labour market.

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File URL: http://pascal.iseg.utl.pt/~depeco/wp/wp292007.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 2007/29.

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Date of creation: 2007
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Handle: RePEc:ise:isegwp:wp292007
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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