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Fiscal policy

Fiscal policy and growth

Updated May 2006

Thanks to Yongfu Huang (Bristol) and Richard Kneller (Nottingham) for providing many of these references.

Introductory reading

Atkinson, Anthony B. (1995). The welfare state and economic performance. National Tax Journal, 48(2), June, 171-198.

Barro, Robert (1990). Government spending in a simple model of endogenous growth. Journal of Political Economy, 98(5), S103-117.

Barro, R. and Sala-i-Martin, X. (1992). Public finance in models of economic growth. Review of Economic Studies, 59, 645-61.

Easterly, W. and Rebelo, S. (1993). Fiscal policy and economic growth. Journal of Monetary Economics, 32, 417-58.

Fatas, Antonio and Mihov, Ilian (2003). The Case for Restricting Fiscal Policy Discretion. Quarterly Journal of Economics, November, 118(4), 1419-47.

Mendoza, E., Milesi-Ferretti, G. and Asea, P. (1997). On the ineffectiveness of tax policy in altering long-run growth: Harberger’s superneutrality conjecture. Journal of Public Economics, 66, 99-126.

Slemrod, Joel (1995). What do cross-country studies teach about government involvement, prosperity, and economic growth? Brookings Papers on Economic Activity, 373-431.

Stokey, N. and Rebelo, S. (1995). Growth effects of flat-rate taxes. Journal of Political Economy, 103(3), 510-50.

Further reading

Aschauer, David Alan (2000). Public Capital and Economic Growth: Issues of Quantity, Finance, and Efficiency. Economic Development and Cultural Change, January, 48(2), 391-406.

Baffes, John and Shah, Anwar (1998). Productivity of public spending, sectoral allocation choices, and economic growth. Economic Development and Cultural Change, 46(2), January, 291-303.

Baldacci, Emanuele; Hillman, Arye L. and Kojo, Naoko C. (2004). Growth, Governance, and Fiscal Policy Transmission Channels in Low-Income Countries. European Journal of Political Economy, September, 20(3), 517-49.

Blankenau, William F and Simpson, Nicole B. (2004). Public Education Expenditures and Growth. Journal of Development Economics, April, 73(2), 583-605.

Bleaney, Michael; Gemmell, Norman and Kneller, Richard (2001). Testing the Endogenous Growth Model: Public Expenditure, Taxation, and Growth over the Long Run. Canadian Journal of Economics, February, 34(1), 36-57.

Cashin, P. (1995). Government spending, taxes and economic growth. IMF Staff Papers, 42(2), 237-69.

Chatterjee, Santanu; Sakoulis, Georgios and Turnovsky, Stephen J. (2003). Unilateral Capital Transfers, Public Investment, and Economic Growth. European Economic Review, December, 47(6), 1077-1103.

Darby, Julia, Li, Chol-Won and Muscatelli, Anton (1998). Political uncertainty, public expenditure and growth University of Glasgow, Discussion Papers in Economics no. 9822

Del Monte, Alfredo and Papagni, Erasmo (2001). Public Expenditure, Corruption, and Economic Growth: The Case of Italy. European Journal of Political Economy, March, 17(1), 1-16.

Dessus, Sebastien and Herrera, Remy (2000). Public Capital and Growth Revisited: A Panel Data Assessment. Economic Development and Cultural Change, January, 48(2), 407-18.

Devereux, M. and Love, D. (1995). The dynamic effects of government spending policies in a two-sector endogenous growth model. Journal of Money, Credit and Banking, 27(1), 232-56.

Devarajan, S., Swaroop, V. and Zou, H. (1996). The composition of public expenditure and economic growth. Journal of Monetary Economics, 37, 313-344.

Devlin, Nancy and Hansen, Paul (2001). Health Care Spending and Economic Output: Granger Causality. Applied Economics Letters, August, 8(8), 561-64.

Engen, E. and Skinner, J. (1996). Taxation and economic growth. National Tax Journal.

Evans, Paul (1997). Government consumption and growth. Economic Inquiry, 209-17.

Evans P. and Karras G. (1994). Are government activities productive? Evidence from a panel of U.S. states. Review of Economics and Statistics, 76(1), 1-11.

Fisher, T. and Turnovsky, S. (1998). Public investment, congestion, and private capital accumulation. Economic Journal, 108, March, 399-413.

Folster, Stefan and Henrekson, Magnus (2001). Growth Effects of Government Expenditure and Taxation in Rich Countries. European Economic Review, August, 45(8), 1501-20.

Futagami, K., Morita, Y., and Shibata, A. (1993) Dynamic analysis of an endogenous growth model with public capital. Scandinavian Journal of Economics, 607-25.

Ghosh, Sugata and Mourmouras, Iannis A. (2002). On Public Investment, Long-Run Growth, and the Real Exchange Rate. Oxford Economic Papers, January, 54(1), 72-90.

Glomm G. and Ravikumar B. (1994) Public investment in infrastructure in a simple growth model. Journal of Economic Dynamics and Control, 18, 1173-87.

Glomm, G. and Ravikumar, B. (1997). Productive government expenditures and long-run growth. Journal of Economic Dynamics and Control, 21, 183-204.

Gong, Liutang and Zou, Heng fu (2003). Military Spending and Stochastic Growth. Journal of Economic Dynamics and Control, October, 28(1), 153-70.

Greiner, Alfred (1996). Fiscal policy in a model of endogenous growth with learning by doing. Public Finance Quarterly, 24(3), 371-390.

Greiner, Alfred and Hanusch, H. (1998). Growth and welfare effects of fiscal policy in an endogenous growth model with public investment. International Tax and Public Finance, 5(3), 249-261.

Gruner, Hans Peterand Heer, Burkhard (2000). Optimal Flat-Rate Taxes on Capital–A Re-examination of Lucas’ Supply Side Model. Oxford Economic Papers, April, 52(2), 289-305.

Gupta, Sanjeev, et al (2004). Fiscal Consequences of Armed Conflict and Terrorism in Low- and Middle-Income Countries. European Journal of Political Economy, Special Issue June, 20(2), 403-21.

Ho, Wai Hong and Wang, Yong (2005). Public Capital, Asymmetric Information, and Economic Growth. Canadian Journal of Economics, February, 38(1), 57-80.

Jones, L., Manuelli, R. and Rossi P. (1993). Optimal taxation in models of endogenous growth. Journal of Political Economy, 101(3), 485-519.

Kahn, James A. and Lim, Jong-Soo. Finite horizons, political economy, and growth. Review of Economic Dynamics.

Kim, Ji Uk (2003). Long-Run Growth and Government Consumption. Applied Economics Letters, May, 10(6), 351-54.

King, R., and Rebelo, S. (1990). Public Policy and economic growth: Developing neoclassical implications. Journal of Political Economy, 98(5), S126-51.

Kocherlakota, N. and Yi, K. (1996). A simple time series test of endogenous vs. exogenous growth models: An application to the United States. Review of Economics and Statistics, 78, 126-34.

Le, Manh Vu and Suruga, Terukazu (2005). Foreign Direct Investment, Public Expenditure and Economic Growth: The Empirical Evidence for the Period 1970-2001. Applied Economics Letters, January, 12(1), 45-49.

Li, Wenli and Sarte, Pierre Daniel (2004). Progressive Taxation and Long-Run Growth. American Economic Review, December, 94(5), 1705-16.

Lin, Justin Yifu and Liu, Zhiqiang (2000). Fiscal Decentralization and Economic Growth in China. Economic Development and Cultural Change, October, 49(1), 1-21.

Lin, Wen Zhung and Yang, C. C. (2001). A Dynamic Portfolio Choice Model of Tax Evasion: Comparative Statics of Tax Rates and Its Implication for Economic Growth. Journal of Economic Dynamics and Control, November, 25(11), 1827-40.

Malley, Jim; Philippopoulos, Apostolis and Economides, George (2002). Testing for Tax Smoothing in a General Equilibrium Model of Growth. European Journal of Political Economy, June, 18(2), 301-15.

Mamatzakis, E. C. (2005). The Dynamic Responses of Growth to Tax Structure for Greece. Applied Economics Letters, February, 12(3), 177-80.

Miller, Stephen M. and Russek, Frank S. (1997). Fiscal structures and economic growth: international evidence. Economic Inquiry, 35(3), July, 603-613.

Nijkamp, Peter and Poot, Jacques (2004). Meta-analysis of the Effect of Fiscal Policies on Long-Run Growth. European Journal of Political Economy, Special Issue March, 20(1), 91-124.

Ram, R. (1986). Government size and economic growth: A new framework and some evidence from cross-section and time series data. American Economic Review, 76(1), 191-203.

Rivas, Luis A. (2003). Income Taxes, Spending Composition and Long-Run Growth. European Economic Review, June, 47(3), 477-503.

Shieh, Jhy yuan; Lai, Ching chong and Chang, Wen ya (2002). The Impact of Military Burden on Long-Run Growth and Welfare. Journal of Development Economics, August, 68(2), 443-54.

Strulik, Holger (2003). Capital Tax Reform, Corporate Finance, and Economic Growth and Welfare. Journal of Economic Dynamics and Control, December, 28(3), 595-615.

Yamarik, Steven (2000). Can Tax Policy Help Explain State-Level Macroeconomic Growth? Economics Letters, August, 68(2), 211-15.

Yi, K. and Kocherlakota, N. (1996). Is there endogenous long-run growth? Evidence from the U.S. and the U.K. Federal Reserve Bank of New York, December, 17.

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