Fiscal Composition and Long-Term Growth

45 Pages Posted: 8 Mar 2013

See all articles by António Afonso

António Afonso

University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics); ISEG Lisbon School of Economics and Management,Universidade de Lisboa; REM - Research in Economics and Mathematics

João Tovar Jalles

University of Lisbon; International Monetary Fund (IMF); Technical University of Lisbon (UTL) - Research Unit on Complexity and Economics (UECE)

Date Written: March 2013

Abstract

We assess the fiscal composition-growth nexus, using a large country panel, accounting for the usually encountered econometric pitfalls. Our results show that revenues have no significant impact on growth whereas expenditures have negative effects. The same is true for the OECD with the addition that government revenue has a negative impact on growth. From our results, taxes on income are not growth enhancing, as well as public wages, interest payments, subsidies and government consumption. Spending on education and health boosts growth; and there is weak evidence supporting causality running from expenditures and revenues to output.

Keywords: Budget deficit, budget decomposition, panel analysis, panel causality

JEL Classification: C23, E62, H50

Suggested Citation

Afonso, António and Jalles, João Tovar, Fiscal Composition and Long-Term Growth (March 2013). ECB Occasional Paper No. 1518, Available at SSRN: https://ssrn.com/abstract=2220798 or http://dx.doi.org/10.2139/ssrn.2220798

António Afonso (Contact Author)

University of Lisbon - ISEG (School of Economics and Management) ( email )

R. Miguel Lupi, 20
Lisbon, 1248-078
Portugal
+351 21 392 5985 (Phone)
+351 21 396 6407 (Fax)

HOME PAGE: http://www.iseg.ulisboa.pt/aquila/homepage/aafonso/research

UECE (Research Unit on Complexity and Economics) ( email )

Rua Miguel Lupi 20
Lisbon, 1249-078
Portugal
+351-213 925 912 (Phone)
+351-213 971 196 (Fax)

HOME PAGE: http://uece.rc.iseg.ulisboa.pt/

ISEG Lisbon School of Economics and Management,Universidade de Lisboa ( email )

Rua do Quelhas 6
LISBOA, 1200-781
Portugal

REM - Research in Economics and Mathematics ( email )

ISEG, Universidade de Lisboa
Rua Miguel Lupi, 20
Lisboa, 1249-078
Portugal

HOME PAGE: http://rem.rc.iseg.ulisboa.pt/

João Tovar Jalles

University of Lisbon ( email )

R. Branca Edmée Marques
Dept. Plant Biology
Lisboa, 1600-276
Portugal

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Technical University of Lisbon (UTL) - Research Unit on Complexity and Economics (UECE)

Rua Miguel Lupi, 20
Lisboa, 1200-781
Portugal

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