New Econometric Estimates of Long-Term Growth Effects of Different Areas of Public Spending

OECD Economics Department Working Papers No. 1100

16 Pages Posted: 25 Aug 2015

See all articles by Omar Barbiero

Omar Barbiero

Harvard University

Boris Cournede

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Date Written: December 6, 2013

Abstract

Using panel data for OECD countries, this study investigates the extent to which changes in government spending on education, health and other areas influence long-term growth. The results suggest that, if total government spending is kept unchanged, increasing expenditure on health, education and transport raises long-term GDP growth. In contrast, government spending on housing is found to weaken long-term GDP growth. The error-correction specification used allows assessing adjustment speed which, consistent with intuition, is estimated to be slow. According to the econometric results, it takes more than five years for half of the effect of a change in the structure of government spending to be reflected in long-term growth.

Keywords: government infrastructure spending, government expenditure, public spending, long-term growth, economic growth, public education spending, public health spending

JEL Classification: H11, H51, H52

Suggested Citation

Barbiero, Omar and Cournede, Boris, New Econometric Estimates of Long-Term Growth Effects of Different Areas of Public Spending (December 6, 2013). OECD Economics Department Working Papers No. 1100. Available at SSRN: https://ssrn.com/abstract=2650044 or http://dx.doi.org/10.2139/ssrn.2650044

Omar Barbiero (Contact Author)

Harvard University ( email )

Cambridge, MA
United States

Boris Cournede

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France
+33145249037 (Phone)

HOME PAGE: http://www.oecd.org/eco

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