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FISCAL POLICY AND ECONOMIC DEVELOPMENT

Published online by Cambridge University Press:  15 September 2009

Alexandros Mourmouras  and
Peter Rangazas
Alexandros Mourmouras
Affiliation:
International Monetary Fund
Peter Rangazas*
Affiliation:
IUPUI
*
Address correspondence to: Peter Rangazas, Economics Department, IUPUI, Indianapolis, IN 46202, USA; e-mail: prangaza@iupui.edu.
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Abstract

This paper offers possible explanations for three generally observed facts about fiscal policy and development: (F1) the relative size of government increases as an economy develops, (F2) the rise in government and taxation are associated with rising or constant economic growth rates, and (F3) today's developing countries have larger government sectors than today's developed countries had at similar stages of development. The explanations for these facts are based on the structural transformation from traditional to modern production, rising public infrastructure investment, and less democratic governments in many of today's developing economies.

Keywords

Fiscal PolicyStructural TransformationWagner's Law
Type
Articles
Information
Macroeconomic Dynamics , Volume 13 , Issue 4 , September 2009 , pp. 450 - 476
Copyright
Copyright © Cambridge University Press 2009

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