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The structure of public spending and economic growth in Russia

Alexey Balaev ()
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Alexey Balaev: Economic Expert Group, Moscow, Russia

Russian Journal of Economics, 2019, vol. 5, issue 2, 154-176

Abstract: This paper examines how Russia’s GDP growth responds to changes in the structure of general government spending. We consider models with expenditures as a percentage of total spending and expenditures as a percentage of GDP. Each model is constructed as a structural vector autoregression (SVAR). We show that redistribution in favor of productive expenditures (national economy, education, healthcare) increases the rate of economic growth, and an increase in the share of unproductive expenditures (national defense, social policy) reduces it. The maximum positive effect comes from expenditures on the national economy: their increase by 1% of GDP with constant total expenditures increases the growth rate of GDP by 1.1 p.p. An increase in expenditures on education by 1% of GDP with constant total expenses contributes +0.8 p.p. to the growth rate of GDP. The corresponding effect of healthcare expenditures is +0.1 p.p. Defense and social spending make negative contributions: –2.1 and –0.7 p.p. respectively. These results are consistent with existing estimates of fiscal multipliers for Russia and calculations based on data from other countries and cross-country data.

Keywords: public expenditures; expenditures structure; productive expenditures; economic growth; econometric model (search for similar items in EconPapers)
JEL-codes: C51 C52 H50 H59 (search for similar items in EconPapers)
Date: 2019
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