Skip Navigation


Oxford Economic Papers Advance Access originally published online on March 6, 2008
Oxford Economic Papers 2008 60(3):484-516; doi:10.1093/oep/gpn005
This Article
Right arrow Full Text
Right arrow Full Text (PDF)
Right arrow All Versions of this Article:
60/3/484    most recent
gpn005v1
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Similar articles in ISI Web of Science
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Ghosh, S.
Right arrow Articles by Gregoriou, A.
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

© Oxford University Press 2008 All rights reserved

The composition of government spending and growth: is current or capital spending better?

Sugata Ghosh* and Andros Gregoriou{dagger}

*Department of Economics and Finance, Brunel University, Uxbridge, Middlesex UB8 3PH; e-mail: sugata.ghosh{at}brunel.ac.uk
{dagger}Department of Economics and Finance, Brunel University; e-mail: andros.gregoriou{at}brunel.ac.uk


  Abstract

In an endogenous growth framework with two public goods with differing productivities, this paper analytically characterizes optimal fiscal policy for a decentralized economy, whereby the optimal values of the growth rate, tax rate and expenditure shares on the two public goods are linked directly to their productivity parameters. Using panel data for 15 developing countries over 28 years, we show using GMM techniques, that current (capital) spending has positive (negative) and significant effects on the growth rate, contrary to commonly held views. For instance, spending on operations and maintenance has a stronger impact on growth than both health and education spending. We consider the various components on the revenue side of the government budget constraint to take into account possible omitted variable bias that could arise if tax revenue alone was considered.

Key Words: JEL classifications: E62 • H50 • O40


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?




Disclaimer:
Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.