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TitlePublic spending and growth : the role of institutions
Author(s)Morozumi, Atsuyoshi
Veiga, Francisco José
KeywordsPublic spending
Economic growth
Institutions JEL: O43, H50, O11
Issue date30-Jun-2014
PublisherUniversidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)
Abstract(s)This paper examines the role of institutions in the nexus between public spending and economic growth. Using a newly assembled dataset of 80 countries over the 1970-2010 period with disaggregated public spending, we show that only when institutions prompt governments to be accountable to the general public, does the capital component of public spending significantly promote growth, especially when financed by a fall in current spending or by increased revenues. Meanwhile, a rise in current spending does not show robust growth-promoting potential, regardless of the level of government accountability. Our interpretation of these findings is that, while capital spending innately has a larger growth-fostering effect than current spending, inefficiencies inhenrent in the former type of spending, caused by officeholders’ rent-seeking behaviour under unaccountable governments, mitigate its fostering effect.
TypeWorking paper
DescriptionNIPE WP 11/2014
Publisher version
AccessOpen access
Appears in Collections:NIPE - Documentos de Trabalho

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