Time-Series Evidence on the Nonlinearity Hypothesis for Public Spending

Stefan Mittnik and Thorsten Neumann

Economic Inquiry, 2003, vol. 41, issue 4, 565-573

Abstract: Barro-type endogenous growth models propose a nonmonotonic relationship between productive public spending and growth. Under this so-called nonlinearity hypothesis the size and direction of growth effects due to an increase in public spending depend on the share of public spending in GDP. Employing German time-series data we examine the validity of the nonlinearity hypothesis. We estimate growth effects by using models whose coefficients are allowed to vary with the share of public spending in GDP. Our results support the hypothesis for public consumption but not for public investment data. (JEL H54, E62, C22) Copyright 2003, Oxford University Press.

JEL-codes: C22 E62 H54 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (23)

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