Public spending reallocations and economic growth across different income levels

Acosta-Ormaechea, Santiago; Morozumi, Atsuyoshi

Abstract

This paper examines the effects of public spending reallocations on economic growth. Assembling a disaggregated public spending dataset of 83 countries over the 1970-2011 period, we show that spending reallocations towards education, from health and social protection, have significant growth-promoting effects across a wide range of countries' income levels. However, income heterogeneity matters, particularly when reallocations involve infrastructure spending. Specifically, a reallocation from this spending to education also promotes growth, albeit primarily when the income level is low. This occurs because the effects of infrastructure spending are particularly weak in low-income countries, possibly due to the low quality of governance.

Citation

Acosta-Ormaechea, S., & Morozumi, A. (2017). Public spending reallocations and economic growth across different income levels. Economic Inquiry, 55(1), 98-114. https://doi.org/10.1111/ecin.12382

• Journal Article Type: Article
• Acceptance Date: May 17, 2016
• Online Publication Date: Aug 3, 2016
• Publication Date: Jan 1, 2017
• Deposit Date: Jul 19, 2016
• Publicly Available Date: Aug 3, 2016
• Journal: Economic Inquiry
• Print ISSN: 0095-2583
• Electronic ISSN: 1465-7295
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 55
• Issue: 1
• Pages: 98-114
• DOI: https://doi.org/10.1111/ecin.12382
• Keywords: Public spending reallocation; Economic growth; Education spending; Infrastructure spending; Income heterogeneity; Governance quality
• Public URL: https://nottingham-repository.worktribe.com/output/970804
• Publisher URL: https://onlinelibrary.wiley.com/doi/10.1111/ecin.12382
• Additional Information: This is the peer reviewed version of the following article: Acosta-Ormaechea, S. and Morozumi, A. (2017), PUBLIC SPENDING REALLOCATIONS AND ECONOMIC GROWTH ACROSS DIFFERENT INCOME LEVELS. Economic Inquiry, 55: 98-114. doi:10.1111/ecin.12382, which has been published in final form at https://doi.org/https://onlinelibrary.wiley.com/doi/10.1111/ecin.12382. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.