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Fiscal Policy and Growth in Developing Asia

Author

Listed:
  • Abdon, Arnelyn May

    ()

  • Estrada, Gemma Esther

    () (Asian Development Bank)

  • Lee, Minsoo

    () (Asian Development Bank)

  • Park, Donghyun

    () (Asian Development Bank)

Abstract

In this paper we empirically explore the relationship between fiscal policy and economic growth in developing Asia. The region’s overall level of taxes and government spending are substantially lower than those prevailing in advanced economies. Nevertheless, there are conceptual grounds why fiscal policy, including the composition of taxes and government spending, can have a significant effect on growth, as our empirical analysis shows. In line with economic theory, property taxes have a more benign impact on growth than direct taxes, and spending more on education has a sizable positive impact on growth.

Suggested Citation

  • Abdon, Arnelyn May & Estrada, Gemma Esther & Lee, Minsoo & Park, Donghyun, 2014. "Fiscal Policy and Growth in Developing Asia," ADB Economics Working Paper Series 412, Asian Development Bank.
  • Handle: RePEc:ris:adbewp:0412
    as

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    File URL: http://www.adb.org/sites/default/files/pub/2014/ewp-412.pdf
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    References listed on IDEAS

    as
    1. Norman Gemmell & Richard Kneller & Ismael Sanz, 2011. "The Timing and Persistence of Fiscal Policy Impacts on Growth: Evidence from OECD Countries," Economic Journal, Royal Economic Society, vol. 121(550), pages 33-58, February.
    2. Kneller, Richard Anthony & Misch, Florian, 2011. "What does ex-post evidence tell us about the output effects of future tax reforms?," ZEW Discussion Papers 11-029, ZEW - Leibniz Centre for European Economic Research.
    3. Dana Hajkova & Giuseppe Nicoletti & Laura Vartia & Kwang-Yeol Yoo, 2007. "Taxation and business environment as drivers of foreign direct investment in OECD countries," OECD Economic Studies, OECD Publishing, vol. 2006(2), pages 7-38.
    4. Wu, Shih-Ying & Tang, Jenn-Hong & Lin, Eric S., 2010. "The impact of government expenditure on economic growth: How sensitive to the level of development?," Journal of Policy Modeling, Elsevier, vol. 32(6), pages 804-817, November.
    5. Ram, Rati, 1986. "Government Size and Economic Growth: A New Framework and Some Evidencefrom Cross-Section and Time-Series Data," American Economic Review, American Economic Association, vol. 76(1), pages 191-203, March.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Emmanuel Atta Anaman & Samuel Gameli Gadzo & John Gartchie Gatsi & Mavis Pobbi, 2017. "Fiscal Aggregates, Government Borrowing and Economic Growth in Ghana An error correction approach," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 7(2), pages 1-5.
    2. Timbul Hamonangan Simanjuntak & Imam Mukhlis, 2017. "The Relation of Fiscal Decentralization, Regional Finance and Social Justice for the Local Development of Indonesia," Applied Economics and Finance, Redfame publishing, vol. 4(1), pages 9-17, January.
    3. Ahmed Waqar Qasim & M. Ali Kemal & Omer Siddique, 2015. "Fiscal Consolidation and Economic Growth: A Case Study of Pakistan," PIDE-Working Papers 2015:124, Pakistan Institute of Development Economics.

    More about this item

    Keywords

    fiscal policy; growth; taxation; government spending; Asia;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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