TY - BOOK ID - 134244366 TI - Fiscal Policy, Public Expenditure Composition, and Growth Theory and Empirics AU - Semmler, Willi AU - Diallo, Bobo AU - Greiner, Alfred AU - Rajaram, Anand AU - Rezai, Armon PY - 2007 PB - Washington, D.C., The World Bank, DB - UniCat KW - Access to Finance KW - Debt KW - Debt Markets KW - Development Policy KW - Development Strategies KW - Economic Growth KW - Economic Theory and Research KW - Finance and Financial Sector Development KW - Fiscal Policy KW - Growth Models KW - Growth Theory KW - Human Capital KW - Macroeconomics and Economic Growth KW - Per Capita Income KW - Production Function KW - Public Sector Economics and Finance KW - Public Sector Expenditure Analysis and Management UR - https://www.unicat.be/uniCat?func=search&query=sysid:134244366 AB - This paper responds to the development policy debate involving the World Bank and the IMF on the use of fiscal policy not only for economic stabilization but also to promote economic growth and increase per capita income. A key issue in this debate relates to the effect of the composition of public expenditure on economic growth. Policy makers and some researchers have argued that expenditure on growth-enhancing functions could enhance future revenue and justify the provision of "fiscal space" in the budget. But there are no simple ways to identify the growth-maximizing composition of public expenditure. The current paper lays out a research strategy to explore the effects of fiscal policy, including the composition of public expenditure, on economic growth, using a time series approach. Based on the modeling strategy of Greiner, Semmler and Gong (2005) we develop a general model that features a government that undertakes public expenditure on (a) education and health facilities which enhance human capital, (b) public infrastructure such as roads and bridges necessary for market activity, (c) public administration to support government functions, (d) transfers and public consumption facilities, and (e) debt service. The proposed model is numerically solved, calibrated and the impact of the composition of public expenditure on the long-run per capita income explored for low-, lower-middle- and upper-middle-income countries. Policy implications and practical policy rules are spelled out, the extension to an estimable model indicated, a debt sustainability test proposed, and the out-of-steady-state dynamics studied. ER -