EconPapers    
Economics at your fingertips  
 

Functional components of public expenditure, fiscal consolidations and the economic activity

Vitor Castro ()

No 12/2016, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: This paper analyses how the functional components of public expenditure and spending-driven consolidations affect the economic growth, unemployment and income inequality. A dynamic panel data LSDVC estimator is employed over a sample of 15 European Union countries during the period 1990-2012. The empirical results show that real GDP growth decreases when fiscal austerity measures are implemented, especially if they are spending-driven. Cuts in public expenditure undermine economic growth, namely if they slash spending on public order, recreation and education. Spending cuts on education, in particular, affect the investment in human capital, harming not only growth but also economic, social and human development. The unemployment rate also proved to be significantly boosted when austerity measures restrict spending on education, while income inequality rises when social protection expenditures are cut.

Keywords: Functional components of public expenditure; Fiscal consolidations; Economic growth; Unemployment; Income inequality; European Union. (search for similar items in EconPapers)
JEL-codes: D63 E24 E62 H50 O47 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.nipe.eeg.uminho.pt//Uploads/WP_2016/NIPEWP12_2016.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nip:nipewp:12/2016

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in NIPE Working Papers from NIPE - Universidade do Minho Núcleo de Investigação em Políticas Económicas e Empresariais, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal. Contact information at EDIRC.
Bibliographic data for series maintained by NIPE ().

 
Page updated 2019-11-20
Handle: RePEc:nip:nipewp:12/2016