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Growth effects of public expenditure on the state and local level: evidence from a sample of rich governments

Torgler, Benno & Schaltegger, Christoph A. (2006) Growth effects of public expenditure on the state and local level: evidence from a sample of rich governments. Applied Economics, 38(10), pp. 1181-1192.

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Abstract

There is a vast empirical literature investigating the relationship between government size and economic growth. But the empirical evidence of growth effects of public expenditure using cross-country regressions is still inconclusive. According to a number of authors this is not surprising since the negative relationship only applies for rich countries with a large public sector. Restricting their analysis on rich countries only they can show the predicted negative impact. Naturally, a selection of a sub-sample of rich countries is always somewhat arbitrary. Another possibility is to concentrate on governments within a rich country. However, only few studies investigate the effect of state and local spending on economic growth. This study concentrates on the relationship between public expenditure and economic growth within a rich country using the full sample of state and local governments from Switzerland over the 1981–2001 period. The general finding is a fairly robust negative relationship between government size and economic growth. However, in contrast to public spending from operating budgets there is no significant impact on economic growth by expenditure from capital budgets.

Impact and interest:

9 citations in Scopus
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7 citations in Web of Science®

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ID Code: 8074
Item Type: Journal Article
Additional Information: For more information, please refer to the journal’s website (see link) or contact the author. Author contact details: benno.torgler@qut.edu.au
Keywords: Applied Economics, Growth effects, public expenditure
DOI: 10.1080/00036840500392334
ISSN: 0003-6846
Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Copyright Owner: Copyright 2006 Taylor & Francis
Copyright Statement: First published in Applied Economics 38(10):pp. 1181-1192.
Deposited On: 13 Jun 2007
Last Modified: 29 Feb 2012 23:22

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