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Measuring the Human Capital Intensity of Government Spending and its Impact on Economic Growth in a Cross Section of Countries

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  • Ron Cronovich

Abstract

This paper contradicts previous findings of a lack of relationship between government spending and long run economic growth. The paper argues that government spending has several opposing effects on growth. I focus on one of these, ‘relative wage effects,’ involving the human capital intensity of government spending. The paper constructs two rough measures of this variable for a diverse cross‐section of countries, and uses them to disentangle relative wage effects from other effects of government spending. The paper finds that, after netting out relative wage effects, government spending is positively correlated with growth across countries. Furthermore, as the theory predicts, relative wage effects appear to be empirically important in countries where (a) government spending comprises a sufficiently large share of aggregate spending, and (b) government spending is particularly human capital‐intensive.

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  • Ron Cronovich, 1998. "Measuring the Human Capital Intensity of Government Spending and its Impact on Economic Growth in a Cross Section of Countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 45(1), pages 48-77, February.
    • Handle: RePEc:bla:scotjp:v:45:y:1998:i:1:p:48-77
    DOI: 10.1111/1467-9485.00081
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    Cited by:

    1. Sefa Awaworyi Churchill & Mehmet Ugur & Siew Ling Yew, 2017. "Does Government Size Affect Per-Capita Income Growth? A Hierarchical Meta-Regression Analysis," The Economic Record, The Economic Society of Australia, vol. 93(300), pages 142-171, March.
    2. Facchini, François & Melki, Mickaël, 2013. "Efficient government size: France in the 20th century," European Journal of Political Economy, Elsevier, vol. 31(C), pages 1-14.
    3. Facchini, François & Melki, Mickaël, 2013. "Efficient government size: France in the 20th century," European Journal of Political Economy, Elsevier, vol. 31(C), pages 1-14.
    4. Peter Nijkamp & Jacques Poot, Victoria, 2002. "Meta-Analysis of the Impact of Fiscal Policies on Long-Run Growth," Tinbergen Institute Discussion Papers 02-028/3, Tinbergen Institute, revised 23 Apr 2003.
    5. World Bank, 2009. "Seychelles - Public Expenditure Review," World Bank Publications - Reports 3089, The World Bank Group.
    6. Arawatari, Ryo & Hori, Takeo & Mino, Kazuo, 2023. "Government expenditure and economic growth: A heterogeneous-agents approach," Journal of Macroeconomics, Elsevier, vol. 75(C).
    7. Poot, Jacques, 1999. "A meta-analytic study of the role of government in long-run economic growth," ERSA conference papers ersa99pa171, European Regional Science Association.
    8. Nijkamp, Peter & Poot, Jacques, 2004. "Meta-analysis of the effect of fiscal policies on long-run growth," European Journal of Political Economy, Elsevier, vol. 20(1), pages 91-124, March.
    9. Ryo Arawatari & Takeo Hori & Kazuo Mino, 2020. "Productive government expenditure and economic growth in a heterogeneous-agents model," KIER Working Papers 1044, Kyoto University, Institute of Economic Research.

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