Endogenous growth testing in the european union and developing countries : taxation, public expenditure and growth

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2003

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Derin, Pınar

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In endogenous growth models, in contrast to the neoclassical growth models, government expenditure and taxation have an effect on the long run growth rate. In this thesis I examine whether the empirical evidence support the predictions of endogenous growth models or the neoclassical growth models in relation to fiscal policy. For this purpose I use panel data for fifteen European Union (EU) member and thirty-three developing countries between the years 1970 and 1999. I specifically test the following two propositions. The first proposition states that distortionary taxation decreases growth while non-distortionary taxation does not. The second, states that productive government expenditure increases growth while non-productive expenditure does not. The empirical results are quite different between European Union countries and developing countries. The results do not support endogenous growth especially for developing countries.

Subject Keywords

Endogenous growth models, Neoclassical growth models, Public expenditure, Taxation, Panel data, Fixed effects

URI

http://etd.lib.metu.edu.tr/upload/1112127/index.pdf
https://hdl.handle.net/11511/14113

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Graduate School of Social Sciences, Thesis

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Citation Formats

P. Derin, “Endogenous growth testing in the european union and developing countries : taxation, public expenditure and growth,” M.S. - Master of Science, Middle East Technical University, 2003.