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Fiscal Policy and Economic Growth: An Empirical Investigation

William Easterly, Sergio Rebelo

NBER Working Paper No. 4499 (Also Reprint No. r1875)
Issued in October 1993
NBER Program(s):The Economic Fluctuations and Growth Program

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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Document Object Identifier (DOI): 10.3386/w4499

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 citation courtesy of

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