No. 107. FISCAL POLICY AND ECONOMIC GROWTH: EMPIRICAL EVIDENCE FROM EU COUNTRIES
N. Benos. 2009.
This paper decomposes public spending and revenues into various sub-categories and estimates the impact of each of them on economic growth. The results provide some support for theoretical models of endogenous growth. Specifically, the main findings are: a) public expenditures on infrastructure (economic affairs and general public services) exert a positive impact on growth; b) government outlays on property rights protection (defense, public order-safety) have a positive effect on per capita growth; c) distortionary taxation depresses growth; d) government expenditures on human capital enhancing activities (education, health, housing-community amenities, environment protection, recreation-culture-religion) and social protection do not have a significant effect on per capita growth. These findings are robust to changes in specification and estimation methodology.