Government size, composition of public expenditure, and economic development

Susana Martins () and Francisco Veiga
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Susana Martins: Universidade do Minho, Escola de Economia e Gestão

No 17/2013, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: This paper analyzes the effects of government size and of the composition of public expenditure on economic development. Using the system-GMM estimator for linear dynamic panel data models, on a sample covering up to 156 countries and 5-year periods from 1980 to 2010, we find that government size as a percentage of GDP has a quadratic (inverted U-shaped) effect on the growth rate of the Human Development Index (HDI). This effect is especially pronounced in developed and high income countries. We also find that the composition of public expenditure affects development, with the share of five subcomponents exhibiting non-linear relationships with HDI growth.

Keywords: Economic Development, Government Size, Composition of public expenditure; Human Development Index (search for similar items in EconPapers)
JEL-codes: H50 O15 O23 O43 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-fdg, nep-pbe and nep-pub
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Journal Article: Government size, composition of public expenditure, and economic development (2014)
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