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Discussion Paper Details

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Title: Fiscal Policy and Economic Growth: An Empirical Investigation

Author(s): William Easterly and Sérgio Rebelo

Publication Date: January 1994

Keyword(s): Development, Fiscal Policy, Growth, Infrastructure and Investment

Programme Area(s): International Macroeconomics

Abstract: 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: first, 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; second, fiscal policy is influenced by the scale of the economy, measured by its population; and third, investment in transport and communication is consistently correlated with growth while the effects of taxation are difficult to isolate empirically.

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Bibliographic Reference

Easterly, W and Rebelo, S. 1994. 'Fiscal Policy and Economic Growth: An Empirical Investigation'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=885