## The Impact of Fiscal Policy Variables on Output Growth

_IMF Working Papers, January 1, 1998_

## Source details

**Canonical URL:** [The Impact of Fiscal Policy Variables on Output Growth](https://www.imf.org/en/publications/wp/issues/2016/12/30/the-impact-of-fiscal-policy-variables-on-output-growth-2457)

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## Bibliographic details
- Authors: Philip R. Gerson
- Published: January 1, 1998
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451841602.001

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### Summary findings
- The paper surveys the theoretical and empirical literature on the relationship between taxation and public expenditure and economic growth.
- Particular attention is paid to the effect of taxation and government expenditure on the supply and productivity of labor and physical capital.
- Studies suggest that well-targeted government expenditures on health, education, and infrastructure should have a positive impact on growth.
- By contrast, the impact of taxation on the supplies of labor and capital, and on output growth, is more muted.

### Key themes and analysis
- Fiscal policy channels examined:
  - Taxation: effects on labor supply, capital supply, and output growth.
  - Government expenditure: effects on labor productivity, physical capital productivity, and overall growth.
- Sectoral emphasis:
  - Health, education, and infrastructure expenditures are highlighted as likely to yield positive growth effects.
- Supply-side mechanisms:
  - Government spending can influence the supply and productivity of labor and physical capital.
  - Taxation influences labor and capital supplies but shows a more muted effect on output growth compared with targeted spending.

### Policy implications and recommendations
- Prioritize well-targeted government expenditures in:
  - Health
  - Education
  - Infrastructure
- Consider that taxation reforms may have limited direct impact on output growth through labor and capital supply channels, implying the importance of complementary policies that enhance productivity.

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## Content in this bundle

- **The Impact of Fiscal Policy Variables on Output Growth - WP/98/1**
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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/the-impact-of-fiscal-policy-variables-on-output-growth-2457_