Government Spending (Expenditure) and Economic Growth: Based on First and Second level COFOG Data

Government Spending (Expenditure) and Economic Growth: Based on First and Second level COFOG Data

This study investigates the effect of a specific government spending on the per capita output by using Classification of the Functions of Government (COFOG) data. We analyzed not only the effect of the first level (division) category on the per capita output, but also specified the impact of the second level R&D data (group). The result of the empirical analysis showed that the government spending on the education has the most important role in the economic growth as it has both strong short-run and long-run effect on GDP per capita. Besides, the R&D spending on the education has the significant long-term growth effect in the analysis of the second level R&D data. In sum, the government spending on education is the most influential factor of the economic growth in the sample of the developed countries and they could promote their economic growth via re-composition of their spending portfolio toward human capital accumulation.