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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
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New Econometric Estimates of Long-term Growth Effects of Different Areas of Public Spending
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- Omar Barbiero1, Boris Cournède2
- Author Affiliations
- 1: Bocconi University, Italy
- 2: OECD, France
- 06 Dec 2013
- Bibliographic information
Using panel data for OECD countries, this study investigates the extent to which changes in government spending on education, health and other areas influence long-term growth. The results suggest that, if total government spending is kept unchanged, increasing expenditure on health, education and transport raises long-term GDP growth. In contrast, government spending on housing is found to weaken long-term GDP growth. The error-correction specification used allows assessing adjustment speed which, consistent with intuition, is estimated to be slow. According to the econometric results, it takes more than five years for half of the effect of a change in the structure of government spending to be reflected in longterm growth.
- government infrastructure spending, government expenditure, public spending, long-term growth, economic growth, public education spending, public health spending
- JEL Classification:
- H11: Public Economics / Structure and Scope of Government / Structure, Scope, and Performance of Government
- H51: Public Economics / National Government Expenditures and Related Policies / Government Expenditures and Health
- H52: Public Economics / National Government Expenditures and Related Policies / Government Expenditures and Education