The impact of budget deficit, public debt and education expenditures on economic growth in Poland

Michał Konopczyński ()
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Michał Konopczyński: Poznań University of Economics and Business, al. Niepodległości 10, 61-875, Poznań, Poland

Acta Oeconomica, 2021, vol. 71, issue 1, 59-84

Abstract: This paper investigates the relationship between economic growth in Poland and a few metrics of fiscal policy: budget deficit relative to GDP, the structure of public debt, education expenditures, and public consumption. We prove that with constant values of parameters of fiscal policy, over time the economy converges to the balanced growth path which is unique and globally asymptotically stable. Having calibrated the model with statistical data, we demonstrate that in the period of 2000–2016 economic growth in Poland was driven primarily by rapid improvement in the level of human capital (at a rate of 5.4% per annum), and secondarily due to the accumulation of capital (2.7% annually). If recent trends in fiscal policy are continued, the Polish economy will converge to the balanced growth path with GDP growing at 3.7%. This rate may be boosted, if fiscal policy is appropriately adjusted, for example by permanent reduction in budget deficit. We also analyse the effects of changes in the financing structure of public debt. Finally, we present several scenarios of increasing public and private spending on education.

Keywords: optimal fiscal policy; economic growth; human capital; budget deficit; public debt (search for similar items in EconPapers)
JEL-codes: E13 E62 F43 H52 H6 (search for similar items in EconPapers)
Date: 2021
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