Government Spending, Taxes, and Economic Growth

August 1, 1994

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper develops an endogenous growth model of the influence of public investment, public transfers, and distortionary taxation on the rate of economic growth. The growth-enhancing effects of investment in public capital and transfer payments are modeled, as is the growth-inhibiting influence of the levying of distortionary taxes which are used to fund such expenditure. The theoretical implications of the model are then tested with data from 23 developed countries between 1971 and 1988, and time series cross sectional results are obtained which support the proposed influence of the public finance variables on economic growth.

Subject: Consumption, Expenditure, Human capital, Public investment spending, Stocks

Keywords: economic growth, mn mathvariant, WP

Pages:
36
Volume:
1994
DOI:
https://doi.org/10.5089/9781451951479.001
Issue:
092
Series:
Working Paper No. 1994/092
Stock No:
WPIEA0921994
ISBN:
9781451951479
ISSN:
1018-5941

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Notes

Study based on data from 23 developed countries between 1971 and 1988. Also published in Staff Papers, Vol. 42, No. 2, June 1995.

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