Government Spending, Taxes, and Economic Growth

IMF Working Papers, August 1, 1994

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Government Spending, Taxes, and Economic Growth

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Bibliographic details

• Authors: Paul Cashin
• Published: August 1, 1994
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451951479.001

Research question and model

• Develops an endogenous growth model of the influence of:
  • public investment,
  • public transfers, and
  • distortionary taxation

on the rate of economic growth.

• Models:
  • growth-enhancing effects of investment in public capital and transfer payments,
  • growth-inhibiting influence of levying distortionary taxes used to fund such expenditure.

Empirical strategy and data

• Tests theoretical implications using data from 23 developed countries between 1971 and 1988.
• Uses time series cross sectional estimation to evaluate the influence of public finance variables on economic growth.

Key findings

• Time series cross sectional results support the proposed influence of the public finance variables on economic growth.
• The paper finds that:
  • public investment and transfer payments can have growth-enhancing effects, and
  • distortionary taxation used to finance such expenditures can inhibit growth.

Publication and metadata

• Author: Paul Cashin
• Date: August 1, 1994
• Pages: 36
• Volume: 1994
• Issue: 092
• Series: Working Paper No. 1994/092
• Stock No: WPIEA0921994
• DOI: https://doi.org/10.5089/9781451951479.001
• ISBN: 9781451951479
• ISSN: 1018-5941

Notes and context

• Study based on data from 23 developed countries between 1971 and 1988.
• Also published in Staff Papers, Vol. 42, No. 2, June 1995.
• Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Source: IMF Working Paper "Government Spending, Taxes, and Economic Growth" by Paul Cashin, August 1, 1994.