Budget Deficits, Economic Freedom, and Economic Growth in OECD Nations: P2SLS Fixed-Effects Estimates, 2003-2008

Cebula, Richard (2011): Budget Deficits, Economic Freedom, and Economic Growth in OECD Nations: P2SLS Fixed-Effects Estimates, 2003-2008. Published in: The Journal of Private Enterprise , Vol. 28, No. 2 (15 September 2013): pp. 75-96.

Abstract

This study empirically investigates the impacts of central government budget deficits and economic freedom on per capita real economic growth in OECD nations over the period 2003–2008. Economic growth is measured by the percentage growth rate of purchasing-power-parity adjusted real per capita GDP. Within the context of the Fixed Effects Model, panel two stage least squares (P2SLS) estimations using a six-year panel dataset for 29 of the 30 the OECD member nations as of 2008 as a group reveal that economic growth is a decreasing function of higher central government budget deficits and an increasing function of economic freedom. It is suggested that governments can best promote real economic growth by limiting the size of their budget deficits (relative to GDP) and pursuing policies consistent with increasing various forms of economic freedom

• Item Type: MPRA Paper
• Language: English
• Keywords: economic growth; economic freedom; budget deficits
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H31 - Household; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H32 - Firm; H - Public Economics > H6 - National Budget, Deficit, and Debt > H62 - Deficit ; Surplus; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General; P - Economic Systems > P1 - Capitalist Systems > P14 - Property Rights

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