FISCAL SPENDING AND ECONOMIC GROWTH

Abstract

This study aims at providing both a theoretical survey and an empirical analysis of the effect of government spending on economic growth. There have been numerous debates regarding how government spending affects economic growth at various levels and via different paths. We can categorize fiscal spending by either function or nature. This study examines the effects of fiscal spending of various functional categories and groups thereof. From the empirical analyses we find evidence that an excessive fiscal spending in infrastructure area may negatively affect future economic growth.