Functional components of public expenditure, fiscal consolidations and economic activity Vítor Castro
By: Castro, Vítor
.
Material type: 
ArticlePublisher: 2018Subject(s): GASTO PUBLICO | REDUCCION | DESARROLLO ECONOMICO | POLITICA FISCAL | MODELOS ECONOMETRICOSOnline resources: Click here to access online
In:
Economics & Politics v. 30, n. 1, March 2018, p. 124-150 Summary: This paper analyses how the functional components of
public expenditure and spending-driven consolidations
affect the economic growth, unemployment, and income
inequality. A dynamic panel data least squares dummy
variable estimator estimator is employed over a sample of
15 European Union countries during the period 1990–
2012. The empirical results show that real GDP growth
decreases when fiscal austerity measures are implemented,
especially if they are spending-driven. Cuts in public expenditure undermine economic growth, namely if they slash spending on public order, recreation, and education. Spending cuts on education, in particular, affect the investment in human capital, harming not only growth but also economic, social, and human development.
The unemployment rate also proved to be significantly
boosted when austerity measures restrict spending
on education, whereas income inequality rises when
social protection expenditures are cut.
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| Artículos | IEF | IEF | OP 1892/2018/1-1 (Browse shelf) | Available | OP 1892/2018/1-1 |
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Resumen.
Bibliografía.
This paper analyses how the functional components of
public expenditure and spending-driven consolidations
affect the economic growth, unemployment, and income
inequality. A dynamic panel data least squares dummy
variable estimator estimator is employed over a sample of
15 European Union countries during the period 1990–
2012. The empirical results show that real GDP growth
decreases when fiscal austerity measures are implemented,
especially if they are spending-driven. Cuts in public expenditure undermine economic growth, namely if they slash spending on public order, recreation, and education. Spending cuts on education, in particular, affect the investment in human capital, harming not only growth but also economic, social, and human development.
The unemployment rate also proved to be significantly
boosted when austerity measures restrict spending
on education, whereas income inequality rises when
social protection expenditures are cut.
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