Government size, composition of public expenditure, and economic development

Susana Martins () and Francisco Veiga

International Tax and Public Finance, 2014, vol. 21, issue 4, 578-597

Abstract: This paper analyzes the effects of government size and of the composition of public expenditure on economic development. Using the system-GMM estimator for linear dynamic panel data models, on a sample covering up to 156 countries and 5-year periods from 1980 to 2010, we find that government size as a percentage of GDP has a quadratic (inverted U-shaped) effect on the growth rate of the Human Development Index (HDI). This effect is especially pronounced in developed and high-income countries. We also find that the composition of public expenditure affects development, with the share of five subcomponents exhibiting nonlinear relationships with HDI growth. Copyright Springer Science+Business Media New York 2014

Keywords: Economic development; Government size; Composition of public expenditure; Human Development Index; H50; O15; O23; O43 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (16)

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Working Paper: Government size, composition of public expenditure, and economic development (2013)
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DOI: 10.1007/s10797-014-9313-4

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