1887

OECD Economics Department Working Papers

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.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

New Econometric Estimates of Long-term Growth Effects of Different Areas of Public Spending

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.

English

Keywords: public spending, government infrastructure spending, public health spending, economic growth, government expenditure, long-term growth, public education spending
JEL: H52: Public Economics / National Government Expenditures and Related Policies / National Government Expenditures and Education; H11: Public Economics / Structure and Scope of Government / Structure, Scope, and Performance of Government; H51: Public Economics / National Government Expenditures and Related Policies / National Government Expenditures and Health
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