The
paper examines public expenditures and their
effects on economic growth. For that purpose we choose four categories
of
expenditures, defence, infrastructure, human capital and R & D
expenditures. Behind these expenditures stands, in socio-political
consideration, a certain notion of the state as an active provider of
public
services for different purposes. From an analytical perspective the
state is integrated
in an institutional or sectoral framework which consists of the public,
the
financial and the real sector. All of these parts are oriented towards
the
development of an economy like it is formulated in the concept of
“Comprehensive Neo-Schumpeterian Economics” (CNSE).
In such a framework the state offers in the
first case via defence expenditures national security as a pure public
good
which may have severe effects on the economic situation of an economy.
In the
second case the state provides capital investment as a prerequisite for
economic development. In the third instance the state is defined as an
institution preparing individuals and society for the uncertainties to
come (resilience).
The fourth category is closely related to innovation, hence
traditionally R &
D expenditures are taken as a proxy for the propensity of a firm or a
society
to invest into the future by creating novelties and using them as
innovations.
So,
which kind of state is the most relevant one when we focus on economic
growth
and development? Is it the “security state” or the
“development state”, in the
sense of catching up, which matters most? What role plays a state which
focusses on resilience by stressing education and health (human
capital) of its
citizens in order to master the future? Or is it, last but not least,
the
“innovation oriented state”, focussing on R
& D, which has the biggest
influence on economic growth?
To answer
these questions we investigate the links between the four categories of
public
expenditures and economic growth in an empirical panel data regression
model
using data for the G20 countries during the period between 2000 and
2012 within
the constraints of data availability. The results reveal that the
impact of
innovation oriented spending on economic growth is much higher than
that of the
variables.
The data used stems from the electronic data base of Government Finance
Statistics (IMF), the Infrastructure Reports for the G20 countries and
the
World Development Indicators (World Bank).
JEL: O30, O38, H5