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Crowding-Out and Crowding-In Effects of the Components of Government Expenditure

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Listed:
  • Habib Ahmed

    (Islamic Development Bank)

  • Stephen M. Miller

    (University of Connecticut)

Abstract

We examine the effects of disaggregated government expenditure on investment using fixed- and random-effect methods. Using the government budget constraint, we explore the effects of tax- and debt-financed expenditure for the full sample, and for sub-samples of developed and developing countries. In general, tax-financed government expenditure crowds out more investment than debt-financed expenditure. Expenditure on social security and welfare reduces investment in all samples while expenditure on transport and communication induces private investment in developing countries.

Suggested Citation

  • Habib Ahmed & Stephen M. Miller, 1999. "Crowding-Out and Crowding-In Effects of the Components of Government Expenditure," Working papers 1999-02, University of Connecticut, Department of Economics.
    • Handle: RePEc:uct:uconnp:1999-02
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    References listed on IDEAS

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    More about this item

    Keywords

    crowding out/crowding in. investment; government expenditure;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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