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 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.

Bibliographic Details

Main Author:	Moreno-Dodson, Blanca
Language:	English
Published:	World Bank, Washington, DC 2008-07
Subjects:	ACCOUNTING, ACCOUNTING FRAMEWORK, ALLOCATION, BUDGET ALLOCATIONS, BUDGET IMPLEMENTATION, BUDGET PLAN, BUDGET SURPLUS, BUREAUCRATIC QUALITY, BUSINESS CYCLES, CAPITAL ACCUMULATION, CAPITAL EXPENDITURE, CAPITAL STOCK, CATEGORIES OF EXPENDITURES, CENTRAL GOVERNMENT, CIVIL SERVICE, CLASSIFICATION OF EXPENDITURES, COMPARISON GROUP, COMPOSITION OF PUBLIC SPENDING, CONSUMER PRICE INDEX, CONTINGENT LIABILITIES, CONTRIBUTION, CONTRIBUTIONS, COUNTRY CASE, COUNTRY LEVEL, CREATIVE ACCOUNTING, CREDIBILITY, CROSS-COUNTRY ANALYSIS, DATA AVAILABILITY, DATA COLLECTION, DEBT SUSTAINABILITY, DECENTRALIZATION, DECENTRALIZATION OF GOVERNMENT ACTIVITIES, DELIVERY OF HEALTH SERVICES, DEPENDANT, DEPENDENT VARIABLE, DEVELOPING COUNTRIES, DEVELOPMENT INDICATORS, DEVELOPMENT STRATEGIES, DUMMY VARIABLE, DUMMY VARIABLES, DYNAMIC PANEL, ECONOMIC AFFAIRS, ECONOMIC GROWTH, ECONOMIC MANAGEMENT, EDUCATION EXPENDITURES, ELECTRICITY, EMPIRICAL LITERATURE, EMPIRICAL REGULARITIES, EMPIRICAL RESULTS, EMPIRICAL STUDIES, ESTIMATED COEFFICIENTS, ESTIMATION METHOD, ESTIMATION RESULTS, EXPENDITURE CLASSIFICATION, EXPENDITURE DECISIONS, EXPENDITURE FUNCTIONS, EXPENDITURE TRACKING SURVEYS, EXPLANATORY VARIABLES, EXTERNAL DEBT, EXTERNALITIES, FINANCES, FINANCIAL CRISES, FISCAL ADJUSTMENT, FISCAL ADJUSTMENTS, FISCAL BALANCE, FISCAL CONTROL, FISCAL DEFICIT, FISCAL DEFICITS, FISCAL DISCIPLINE, FISCAL EXPENDITURES, FISCAL POLICY, FISCAL REVENUE, FISCAL RULES, FISCAL STABILITY, FISCAL SURPLUS, FISCAL TARGETS, GENERAL PUBLIC, GINI COEFFICIENT, GOLDEN RULE, GOVERNMENT BUDGET, GOVERNMENT BUDGET CONSTRAINT, GOVERNMENT BUDGETS, GOVERNMENT EXPENDITURE, GOVERNMENT EXPENDITURES, GOVERNMENT SAVINGS, GOVERNMENT SPENDING, GROWTH CONTEXT, GROWTH EFFECT, GROWTH EQUATION, GROWTH IMPACT, GROWTH LITERATURE, GROWTH PROCESS, GROWTH RATE, GROWTH RATES, GROWTH REGRESSION, GROWTH REGRESSIONS, HEALTH CARE, HEALTH EXPENDITURE, HEALTH EXPENDITURES, HEALTH OUTCOMES, HOUSING, HUMAN CAPITAL, HUMAN DEVELOPMENT, INCOME, INCOME DISPARITIES, INCOME DISTRIBUTION, INCOME POVERTY, INDEPENDENT VARIABLES, INDEX GROWTH, INDUSTRIAL POLICY, INFLATION, INFLATION RATE, INFRASTRUCTURE INVESTMENT, INFRASTRUCTURE INVESTMENTS, INTEREST RATES, INTERNATIONAL BANK, INVESTMENT FLOWS, INVESTMENT RATIO, LABOR FORCE, LAGGED DEPENDENT, LAGGED GROWTH, LAGGED VALUE, LAGGED VALUES, LEVELS OF PUBLIC SPENDING, LIFE EXPECTANCY, LIVING STANDARDS, LONG RUN, LONG-RUN GROWTH, LOW INCOME, MACROECONOMIC INSTABILITY, MACROECONOMIC STABILITY, MAINTENANCE OF ROADS, NEGATIVE EFFECT, NEGATIVE IMPACT, NEGATIVE SIGN, NET BORROWING, NET CAPITAL, NET DEBT, NET LENDING, 0 HYPOTHESIS, PANEL REGRESSIONS, PER CAPITA GROWTH, PHYSICAL ASSETS, POLICY FORMULATION, POLICY IMPLICATIONS, POLICY ISSUES, POLICY MAKERS, POLICY PERSPECTIVE, POLICY RESEARCH, POLITICAL CONSIDERATIONS, POLITICAL RISK, POSITIVE COEFFICIENT, POVERTY REDUCTION, PRICE INDEX, PRIVATE CAPITAL, PRIVATE INVESTMENT, PRIVATE INVESTMENTS, PRIVATE SECTOR, PRIVATE SECTOR INVESTMENT, PRODUCTIVITY, PROPERTY RIGHTS, PUBLIC, PUBLIC CAPITAL, PUBLIC DEBT, PUBLIC EXPENDITURE, PUBLIC EXPENDITURE TRACKING, PUBLIC EXPENDITURES, PUBLIC FINANCE, PUBLIC FUNDS, PUBLIC INVESTMENT, PUBLIC INVESTMENTS, PUBLIC SECTOR, PUBLIC SERVICES, PUBLIC SPENDING, QUALITY OF EDUCATION, QUALITY OF PUBLIC SPENDING, RATE OF GROWTH, RATES OF RETURN, RATIO OF PUBLIC SPENDING, RESEARCH ASSISTANCE, RETURN, ROAD NETWORK, RURAL AREAS, SALARIES, SANITATION, SAVINGS, SIGNIFICANT EFFECT, SIGNIFICANT IMPACT, SOCIAL EXPENDITURE, SOCIAL EXPENDITURES, SOCIAL INFRASTRUCTURE, SOCIAL SECURITY, SOCIAL SPENDING, STANDARD DEVIATION, STATE UNIVERSITY, STOCKS, TAX, TAX BURDEN, TAX REVENUE, TAX REVENUES, TAX SYSTEM, TAXATION, TECHNOLOGICAL PROGRESS, TOTAL PUBLIC SPENDING, TOTAL SPENDING, TRADING, TRANSPARENCY, TYPES OF EXPENDITURES, UNCERTAINTY,
Online Access:	http://documents.worldbank.org/curated/en/2008/07/9669857/assessing-impact-public-spending-growth-empirical-analysis-seven-fast-growing-countries https://hdl.handle.net/10986/6850
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