NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Fiscal Policy and Economic Growth: An Empirical Investigation

William Easterly, Sergio Rebelo

NBER Working Paper No. 4499 (Also Reprint No. r1875)
Issued in May 1994
NBER Program(s):   EFG

This paper describes the empirical regularities relating fiscal policy variables, the level of development and the rate of growth. We employ historical data, recent cross-section data, and newly constructed public investment series. Our main findings are: (i) there is a strong association between the development level and the fiscal structure: poor countries rely heavily on international trade taxes, while income taxes are only important in developed economies; (ii) fiscal policy is influenced by the scale of the economy, measured by its population; (iii) investment in transport and communication is consistently correlated with growth while the effects of taxation are difficult to isolate empirically.

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Published: Easterly, William & Rebelo, Sergio. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December 1993

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