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Guest Lecture: Professor Norman GemmellLong-run Growth and the Composition of Government Spending and Taxes

Page updated 20 Sep 2007

Slides and abstract from Professor Norman Gemmell's Guest Lecture presented at the Treasury on 28 February 2006.

Professor Norman Gemmell

University of Nottingham

Norman Gemmell is Professorial Research Fellow in the School of Economics, University of Nottingham, having previously been Reader (1990-96) and Professor (1996-99) of Development Economics. His main research interests are in the fields of economic development, especially public finance in developing countries; economic growth, where his work has focussed on the impact of education, public expenditure, taxation and debt on economic growth; and public finance/public choice - modelling demands for public expenditure, tax revenue responsiveness and redistribution.

Abstract

This lecture will review and evaluate the recent literature on the long-run impacts of fiscal policy on growth at the macro level. It will focus on a number of key recent developments in the theoretical and empirical literatures. These issues are pursued empirically for a sample of OECD countries, examining the robustness of previous ‘long-run’ results to new empirical methods. The evidence suggests:

  • the composition of taxes and expenditures is crucial;
  • false conclusions are likely to be drawn from evidence that ignores the government budget constraint;
  • there are strong long-run similarities, but short-run differences, across OECD countries;
  • long-run’ growth effects of fiscal policy are typically achieved within a few years.

The most appropriate interpretation of the evidence would appear to be that fiscal policy effects on growth are short-run and significant, and these are also persistent, provided the initial fiscal policy changes are not reversed.

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