FISCAL STRUCTURES AND ECONOMIC-GROWTH - INTERNATIONAL EVIDENCE

Our paper systematically examines the effects of fiscal structure on e conomic growth. We find that for developing countries, debt-financed i ncreases in government expenditure retard growth and tax-financed incr eases stimulate growth, while for developed countries, debt-financed i ncreases in government expenditure do not affect growth and tax-financ ed increases lower growth. We impose the government budget constraint on the regression equations so that the precise changes in fiscal poli cy can be identified (e.g., the effect of a debt-financed increase in health expenditure), employing a pooled cross-section, time-series sam ple and fixed- and random-effect methods.