The Role of Government in Capital Constrained Economies

Tove Strauss
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Tove Strauss: Dept. of Economics, Stockholm School of Economics, Postal: P.O. Box 6501, S-113 83 Stockholm, Sweden

No 215, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: Is the role of government different in poor countries? We examine the government's role for growth in 40 LDCs with low infrastructure levels and limited access to capital. We consider both expenditure and financing aspects of government activity, but cannot conclude that governments in LDCs differ substantially from those with more efficient allocation mechanisms for private capital. However, we find that government consumption expenditure is a negative robust determinant of growth, emphasizing the importance of efficient allocation of government expenditure to reproductive investment. Although the debt-service ratio is not significant, increased public borrowing is a robust negative determinant of growth.

Keywords: Growth; developing countries; government; public investment; public debt (search for similar items in EconPapers)
JEL-codes: C21 E62 H54 H63 O40 (search for similar items in EconPapers)
Pages: 36 pages
Date: 1997-12-15
Note: This working paper is replaced by no. 275
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0215

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