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Keywords:

  • core expenditure;
  • economic growth;
  • government budget;
  • heterogeneity;
  • public spending;
  • H50;
  • O11;
  • O23

ABSTRACT

Although many studies indicate that both the level and composition of public spending are significant for economic growth, the results in the empirical literature are mixed. This paper suggests that the country sample selection and expenditure classification are important in explaining these conflicting results. The empirical analysis shows that the link between growth and public spending, especially its core component, is strong only for countries with macroeconomic stability and fast GDP per capita growth dynamics, which are also capable of using public funds for productive purposes.