Long-run Growth Effects of Government Spending in Austria
Type Research Project
- Government Debt Committee
Duration Oct. 1, 2002 - March 31, 2003
- Economics 1/Public Sector and Monetary Policy AE (Former organization)
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- Zagler, Martin (Details) Project Head
This study investigates the impact of four distinct public expenditure categories, education spending, research and development expenditures, public infrastructure investment, and investment subsidies on the long-run growth performance of the Austrian economy. We obtain a point estimator for the impact on the economic growth rate of a one percentage point increase in infrastructure investment of 0.32. We find a cumulated effect on the growth of a one percentage point annual increase in education expenditures of 0.27 over ten years and 0.80 over 25 years. A one percentage point increase in the share of public research and development expenditures increases output by 0.72 percent over the next ten years and 2.87 percent over the next 25 years, whereas a one percentage point increase in investment subsidies would only lead to a cumulated effect of 0.02 and 0.04 respectively. These results have to be treated with care for several reasons. First, the numbers indicated above are only point estimates, with range estimators given in the study. Second, it requires different fiscal costs to bring about a one percentage point increase in different expenditure categories. And finally, these figures have been obtained ignoring potentially distortionary effects when funding public expenditures.