Patterns in the composition of public expenditures in CEE countries

摘要

The aim of this study is to investigate, from both theoretical and empirical points of view, the composition of public expenditures in Central and Eastern European Countries, and its impact on economic growth. Even if the problem of optimal public expenditures structure was largely debated in literature, especially from a neoclassical perspective, only a few studies have addressed the optimal composition of public expenditure in European developing countries. The findings could be valuable for policy makers, especially when one looks at arbitrary cuts in public expenditures adopted in most of these countries in recent years, as a response to the financial crisis and public debt and deficit crisis. Neither economic theory nor empirical evidence provides clear answers to the question of how the composition of public expenditures affects economic growth. Using regression analysis for data over 1995-2012 for a group of CEE countries, we estimate the correlation between the two types of public expenditures (current and capital) and economic growth. We investigate, using the Armey's model, the optimal levels of current and capital public expenditures which help maximizing economic growth. Comparing to neoclassical model, our estimations show non-optimal composition of public expenditures for the analyzed countries.