Fiscal Policy and Growth in Developing Asia
24 Pages Posted: 29 Oct 2014
Date Written: October 2014
In this paper we empirically explore the relationship between fiscal policy and economic growth in developing Asia. The region’s overall level of taxes and government spending are substantially lower than those prevailing in advanced economies. Nevertheless, there are conceptual grounds why fiscal policy, including the composition of taxes and government spending, can have a significant effect on growth, as our empirical analysis shows. In line with economic theory, property taxes have a more benign impact on growth than direct taxes, and spending more on education has a sizable positive impact on growth.
Keywords: fiscal policy, growth, taxation, government spending, Asia
JEL Classification: H20, H50
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