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Inter-state variations in economic growth does size and composition of state spending matter?
Recent global economic crisis has once again brought to the forefront the role of fiscal policy in promoting growth and reducing poverty. In the past, studies have shown that different typesm of government spendings have differential impacts on economic growth. This implies that there is a potential...
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Published in: | Indian economic journal 2011-04, Vol.59 (1), p.64-71 |
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Main Authors: | , |
Format: | Article |
Language: | English |
Subjects: | |
Online Access: | Get full text |
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Summary: | Recent global economic crisis has once again brought to the forefront the role of fiscal policy in promoting growth and reducing poverty. In the past, studies have shown that different typesm of government spendings have differential impacts on economic growth. This implies that there is a potential to improve the efficiency of government spending by re-allocating resources among sectors. In this backdrop, we have examined how the size and composition of public spending impacts the level and growth of per capita income. The study is carried out for 14 states of India over the period 1990-91 to 2007-08. Using generalised estimating equations (GEE), results confirm that government expenditure stimulates growth. Although impacts of public expenditure in the aggregate as well as of its components vary, their growth impacts remain positive and in a large number of cases highly robust and significant. Based on the elasticity estimates, the present study makes a case for expanded public expenditure, with larger allocations to infrastructure, agriculture and education. |
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ISSN: | 0019-4662 |