The Impact of Fiscal Policy Variables on Output Growth

January 1, 1998

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

Summary

This 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.

Subject: Expenditure, Income, Labor, Labor supply, National accounts, Production, Production growth

Keywords: Africa, capital goods, capital investment, closed economy, cost of capital, East Africa, economic growth, Fiscal Policy, Government Expenditure, Growth, Income, income effect, income elasticity, income tax, infrastructure investment, interest rate, Labor supply, Middle East, North Africa, per capita income, personal income, production function, Production growth, rate of return, returns to scale, Sub-Saharan Africa, substitution effect, Taxation, WP

Pages:
74
Volume:
1998
DOI:
https://doi.org/10.5089/9781451841602.001
Issue:
001
Series:
Working Paper No. 1998/001
Stock No:
WPIEA0011998
ISBN:
9781451841602
ISSN:
1018-5941

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