Composition of Government Expenditure, Human Capital Accumulation, and Welfare

John Matovu

No 2000/015, IMF Working Papers from International Monetary Fund

Abstract: This paper uses a dynamic general equilibrium model calibrated to Ugandan data to examine the welfare effects of alternative scenarios of government expenditure and tax financing. Two expenditure types are considered: social spending that affects human capital, and infrastructure expenditures that affect productivity. The paper finds that social expenditures lead to higher economic growth depending on the form of financing; young generations benefit most from social spending financed by consumption taxes; agents do not substitute between human and physical capital as a result of changes in expenditure composition; and improving the productivity of fiscal expenditure is both growth and welfare enhancing.

Keywords: WP; capital stock; physical capital; public expenditure; government expenditure; welfare; growth; tax financing; infrastructure expenditure; age-consumption profile; expenditure policy change; policy reform; aggregate consumption; government investment expenditure; financing expenditure; Human capital; Health care spending; Consumption taxes; Education spending; Africa; Sub-Saharan Africa (search for similar items in EconPapers)
Pages: 26
Date: 2000-01-01
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Citations: View citations in EconPapers (2)

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