Fiscal Policy, Economic Growth and Innovation: An Empirical Analysis of G20 Countries

Levy Economics Institute, Working Paper No. 883

16 Pages Posted: 1 Mar 2017

See all articles by Horst Hanusch

Horst Hanusch

University of Augsburg - Faculty of Business and Economics

Lekha Chakraborty

Bard College - The Levy Economics Institute; National Institute of Public Finance and Policy

Swati Khurana

National Institute of Public Finance and Policy

Date Written: February 27, 2017

Abstract

This paper analyzes the effectiveness of public expenditures on economic growth within the analytical framework of comprehensive Neo-Schumpeterian economics. Using a fixed-effects model for G20 countries, the paper investigates the links between the specific categories of public expenditures and economic growth, captured in human capital formation, defense, infrastructure development, and technological innovation. The results reveal that the impact of innovation-related spending on economic growth is much higher than that of the other macro variables. Data for the study was drawn from the International Monetary Fund’s Government Finance Statistics database, infrastructure reports for the G20 countries, and the World Development Indicators issued by the World Bank.

Keywords: Fiscal Policy, Public Expenditure; Defense, Innovation, Growth, Neo-Schumpeterian Economics

JEL Classification: H5, O30, O38

Suggested Citation

Hanusch, Horst and Chakraborty, Lekha S. and Khurana, Swati, Fiscal Policy, Economic Growth and Innovation: An Empirical Analysis of G20 Countries (February 27, 2017). Levy Economics Institute, Working Paper No. 883, Available at SSRN: https://ssrn.com/abstract=2924801 or http://dx.doi.org/10.2139/ssrn.2924801

Horst Hanusch (Contact Author)

University of Augsburg - Faculty of Business and Economics ( email )

Augsburg, 86135
Germany

Lekha S. Chakraborty

Bard College - The Levy Economics Institute ( email )

New York

National Institute of Public Finance and Policy ( email )

New Delhi
India

Swati Khurana

National Institute of Public Finance and Policy ( email )

18/2, Satsang Vihar Marg
New Delhi, 110067
India

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