In this study we employ evidence from 16 Latin American and Caribbean countries to examine the relationship between fiscal expenditures and economic growth. We find expenditures on public and merit goods and transfer payments to have a positive impact on economic growth and government inefficiency to have a negative impact. Interestingly, only expenditures on merit goods maintain their overall significance when the sample is stratified into positive vs. negative economic growth sub-samples. The group of countries with positive economic growth shows a pattern of expenditures on transfers and economic goods that is more supportive of their economic growth and exhibits greater restraint in the growth of the cost of fiscal expenditures.
Title
Fiscal expenditure policy and economic growth: Evidence from Latin America and the Caribbean
Hutchinson, G. A. and U. Schumacher. (1997) "Fiscal expenditure policy and economic growth: Evidence from Latin America and the Caribbean." Social and Economic Studies 46 (4): 1-16.