Bayraktar, NihalMoreno-Dodson, Blanca2012-03-192012-03-192010-07-01https://hdl.handle.net/10986/3851Although many studies indicate that both the level and composition of public spending are significant for economic growth, the results in the empirical literature are still mixed. This paper studies the importance of country sample selection and expenditure classification in explaining these conflicting results. It investigates a set of fast-growing countries versus a mix of countries with different growth patterns. The regression specifications include different components of public expenditure and total fiscal revenues, always considering the overall government budget constraint. Total public spending is first disaggregated using a definition that classifies public spending as productive versus unproductive components, an a priori criterion that is based on the expected impact of public spending items on the private sector production function. After empirically confirming the validity of this definition in the panel analysis, the authors suggest and test an alternative definition of "core" public spending that may be more appropriate for developing countries. The empirical analysis shows that the link between growth and public spending, especially the productive and "core" components, is strong only for the fast-growing group. In addition, macroeconomic stability, openness, and private sector investment are significant in the fast-growing group, which points to the existence of an economic policy environment more conducive to growth in the first group of countries. The authors conclude that public spending can be a significant determinant of growth for countries that are capable of using funds for productive purposes.CC BY 3.0 IGOALLOCATIONAVERAGE PRODUCTIVITYBANK POLICYBONDBUDGET BALANCEBUDGET DEFICITBUDGET SURPLUSBUSINESS CYCLEBUSINESS CYCLESCAPITAL ACCUMULATIONCAPITAL EXPENDITURECAPITAL SPENDINGCENTRAL GOVERNMENTCENTRAL GOVERNMENT EXPENDITURECIVIL SERVICECOEFFICIENTSCOMPARATIVE ANALYSISCOMPARATIVE ECONOMIC STUDIESCOMPARISON GROUPCOMPOSITION OF GOVERNMENT SPENDINGCOMPOSITION OF PUBLIC SPENDINGCONSUMER PRICE INDEXCONSUMPTION EXPENDITURECORRELATION COEFFICIENTCOUNTRY CHARACTERISTICSCOUNTRY DATACOUNTRY INITIALCOUNTRY LEVELCOUNTRY RISKCOUNTRY SPECIFICCREATIVE ACCOUNTINGCREDIBILITYCROSS-COUNTRY ANALYSISCURRENT EXPENDITURESDATA ANALYSISDATA AVAILABILITYDEBTDECISION-MAKINGDEFENSE EXPENDITURESDEVELOPED COUNTRIESDEVELOPING COUNTRIESDOMESTIC INVESTMENTDUMMY VARIABLEDUMMY VARIABLESDYNAMIC PANELECONOMETRIC TECHNIQUESECONOMIC AFFAIRSECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMIC POLICYECONOMIC POLICY ENVIRONMENTEMPIRICAL EVIDENCEEMPIRICAL LITERATUREEMPIRICAL RESULTSEMPIRICAL STUDIESEMPLOYMENT EQUATIONSEQUIPMENTESTIMATED COEFFICIENTESTIMATED COEFFICIENTSESTIMATION RESULTSESTIMATION TECHNIQUESEXPENDITUREEXPENDITURE CLASSIFICATIONEXPENDITURE COMPOSITIONEXPENDITURESEXPENDITURES ON HEALTHFINANCESFINANCIAL CRISESFINANCIAL STATISTICSFISCAL ADJUSTMENTFISCAL AFFAIRSFISCAL BALANCEFISCAL EXPENDITURESFISCAL POLICIESFISCAL POLICYFISCAL REVENUEFISCAL RULESFIXED CAPITALGOLDEN RULEGOVERNMENT BUDGETGOVERNMENT BUDGET CONSTRAINTGOVERNMENT CONSUMPTIONGOVERNMENT EXPENDITUREGOVERNMENT EXPENDITURESGOVERNMENT FINANCINGGOVERNMENT INVESTMENTGOVERNMENT INVOLVEMENTGOVERNMENT REVENUEGOVERNMENT SPENDINGGROSS DOMESTIC PRODUCTGROSS FIXED CAPITAL FORMATIONGROWTH CONTEXTGROWTH IMPACTGROWTH MODELGROWTH PERFORMANCEGROWTH RATEGROWTH RATESHEALTH EXPENDITUREHEALTH SERVICESHEALTH SPENDINGHIGH GROWTHHOUSINGHUMAN CAPITALINCREASE GROWTHINCREASES GROWTHINDEPENDENT VARIABLESINDUSTRIAL SECTORINEFFICIENT PROVISIONINFLATIONINFLATION RATEINFRASTRUCTURE INVESTMENTSINSURANCEINTERNATIONAL BANKINTERNATIONAL TRADELABOR FORCELAGGED VALUELAGGED VALUESLEVEL OF PUBLIC SPENDINGLIABILITYLONG RUNLONG-RUN GROWTHLOW-INCOME COUNTRIESLOWER TAXESMACROECONOMIC POLICIESMACROECONOMIC STABILITYMACROECONOMIC VARIABLESMEAN GROWTHMILITARY EXPENDITURESMONETARY FUNDNATURAL RESOURCESNEGATIVE IMPACTNEGATIVE INCENTIVESNEGATIVE SIGNNET BORROWINGNET DEBTNET LENDINGPANEL REGRESSIONSPER CAPITA GROWTHPOLICY ENVIRONMENTPOLICY FORMULATIONPOLICY IMPLICATIONSPOLICY MAKERSPOLICY RESEARCHPOLITICAL ECONOMYPOVERTY REDUCTIONPRICE INDEXPRIVATE CAPITALPRIVATE INVESTMENTPRIVATE INVESTORSPRIVATE SECTORPRIVATE SECTOR INVESTMENTPUBLICPUBLIC ASSETSPUBLIC CAPITALPUBLIC CHOICEPUBLIC CONSUMPTIONPUBLIC ECONOMICSPUBLIC EDUCATIONPUBLIC EDUCATION EXPENDITUREPUBLIC EXPENDITUREPUBLIC EXPENDITURESPUBLIC FUNDSPUBLIC HEALTHPUBLIC HEALTH EXPENDITUREPUBLIC INFRASTRUCTUREPUBLIC INVESTMENTPUBLIC INVESTMENTSPUBLIC SECTORPUBLIC SECTOR INVESTMENTSPUBLIC SERVICESPUBLIC SPENDINGPUBLIC TRANSPORTATIONPUBLIC WORKSQUALITY OF EDUCATIONREDUCING INFLATIONRICH COUNTRIESROADSRURAL INFRASTRUCTURESIGNIFICANT EFFECTSIGNIFICANT IMPACTSIZE OF GOVERNMENTSOCIAL CONTRIBUTIONSSOCIAL EXPENDITURESOCIAL SECURITYSOCIAL SECURITY CONTRIBUTIONSSOCIAL SPENDINGSUB-NATIONALTAXTAX RATETAX RATESTAX REVENUETAX REVENUESTAX STRUCTURETAXATIONTOTAL EXPENDITURETOTAL EXPENDITURESTOTAL GOVERNMENT EXPENDITURETOTAL PUBLIC EXPENDITURETOTAL PUBLIC EXPENDITURESTOTAL PUBLIC SPENDINGTRANSFER PAYMENTSTRANSITION ECONOMIESWorld Bank10.1596/1813-9450-5367