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New Econometric Estimates of Long-term Growth Effects of Different Areas of Public Spending

  • Omar Barbiero
  • Boris Cournède

Using panel data for OECD countries, this study investigates the extent to which changes in government spending on education, health and other areas influence long-term growth. The results suggest that, if total government spending is kept unchanged, increasing expenditure on health, education and transport raises long-term GDP growth. In contrast, government spending on housing is found to weaken long-term GDP growth. The error-correction specification used allows assessing adjustment speed which, consistent with intuition, is estimated to be slow. According to the econometric results, it takes more than five years for half of the effect of a change in the structure of government spending to be reflected in longterm growth. Nouvelles évaluations économétriques de l'effet à long terme sur la croissance de différentes catégories de dépense publique Au moyen de données de panel pour les pays de l’OCDE, cette étude examine la manière dont les modifications du niveau des dépenses publiques d’éducation, de santé et dans d’autres domaines influencent la croissance à long terme. Les résultats suggèrent que, pour un niveau donné de dépenses publiques totales, une augmentation des dépenses de santé, d’éducation et de transport augmente la croissance à long terme. À l’inverse, les dépenses publiques de logement semblent affaiblir la croissance à long terme. Le modèle à correction d’erreur employé pour cette étude permet d’évaluer la vitesse d’ajustement qui, conformément à l’intuition, se révèle être lente. D’après les résultats économétriques, il faut compter plus de cinq ans avant que 50% des effets d’un changement de la structure des dépenses publiques ne se fassent sentir dans la croissance à long terme.

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 1100.

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Date of creation: 06 Dec 2013
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Handle: RePEc:oec:ecoaaa:1100-en
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