Assessing the Impact of Public Spending on Growth : An Empirical Analysis for Seven Fast Growing Countries
The goal of this paper is to understand better, at the empirical level, how public spending contributes to growth by focusing on both the level and composition of public spending, in connection to the dynamics of GDP per capita growth. It attempts...
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2008/07/9669857/assessing-impact-public-spending-growth-empirical-analysis-seven-fast-growing-countries http://hdl.handle.net/10986/6850 |
| Summary: | The goal of this paper is to understand
better, at the empirical level, how public spending
contributes to growth by focusing on both the level and
composition of public spending, in connection to the
dynamics of GDP per capita growth. It attempts to answer two
specific questions: (a) What are the policy conditions under
which public spending contributes positively to growth? and
(b) What are the public spending components that have a
stronger and longer-lasting impact on growth? The analysis
is applied to a sample of seven fast-growing developing
countries: Korea, Singapore, Malaysia, Thailand, Indonesia,
Botswana, and Mauritius, which have been among the top
performers in the world in terms of GDP per capita growth
during the period (1960-2006). The rationale for this
country sample selection is twofold. The first hypothesis is
that, given their positive growth achievements over a
relatively long time period, perhaps it is more
straightforward to establish a link to public spending in
those countries. Second, it is expected that the findings of
the analysis will provide lessons regarding the level and
composition of public spending that can be useful for other
countries where growth has been less rapid. Assessing what
role public spending has played in a dynamic growth context
may indeed be enlightening for other cases as well. The
paper is structured as follows. The first section is an
introduction that provides relevant facts and information
about the seven countries during the period of analysis,
based on seven individual country case studies. Section II
presents the theoretical background behind the empirical
analysis. Section III focuses on the empirical methodology,
function specification, and variables selected. Section IV
is dedicated to the results obtained with the cross-country
analysis and some specific country results, as well as some
comparisons with previous findings by other authors.
Finally, Section V draws policy implications and concludes. |
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