Does the Composition of Government Expenditure Matter for Long‐Run GDP Levels?

26 Pages Posted: 6 Jul 2016

See all articles by Norman Gemmell

Norman Gemmell

Victoria University of Wellington - Victoria Business School

Richard Kneller

University of Nottingham

Ismael Sanz

Universidad Rey Juan Carlos

Multiple version iconThere are 2 versions of this paper

Date Written: August 2016

Abstract

We examine the long‐run GDP impacts of changes in total government expenditure and in the shares of different spending categories for a sample of OECD countries since the 1970s, taking account of methods of financing expenditure changes and possible endogenous relationships. We provide more systematic empirical evidence than available hitherto for OECD countries, obtaining strong evidence that reallocating total spending towards infrastructure and education is positive for long‐run output levels. Reallocating spending towards social welfare (and away from all other expenditure categories pro‐rata) may be associated with modest negative effects on output in the long run.

Suggested Citation

Gemmell, Norman and Kneller, Richard and Sanz, Ismael, Does the Composition of Government Expenditure Matter for Long‐Run GDP Levels? (August 2016). Oxford Bulletin of Economics and Statistics, Vol. 78, Issue 4, pp. 522-547, 2016. Available at SSRN: https://ssrn.com/abstract=2803660 or http://dx.doi.org/10.1111/obes.12121

Norman Gemmell (Contact Author)

Victoria University of Wellington - Victoria Business School ( email )

PO Box 600
Wellington 6140
New Zealand

Richard Kneller

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Ismael Sanz

Universidad Rey Juan Carlos ( email )

Calle Tulipán, s/n
Madrid, Móstoles 28230
Spain

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