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Economía UNAM

versión impresa ISSN 1665-952X


SALAZAR, César Armando. Public Spending and Economic Growth: Theoretical Controversies and evidence for Mexico. Economía UNAM [online]. 2020, vol.17, n.50, pp.53-71.  Epub 22-Dic-2020. ISSN 1665-952X.

This article analyzes the influence of public spending on economic growth. We distinguish between the different theoretical transmission’s channels of the effects of government spending -total and by components, consumption and investment- on long-term economic growth. From mainstream economic thought, public spending has effects on long-term economic growth when it positively influences productivity. On the other hand, from the heterodox approach, the stimulus towards the demand provided by public spending is essential to maintain long-term economic dynamics. After this analysis, we estimate a cointegration model and error correction mechanism for the Mexican economy, with quarterly data in the period 1995-2018. The results of the model show that total public spending, and by components, have a positive and significant impact on economic growth in the short and long terms. However, the coefficients are small. Finally, in our analysis of results, we argue that the size of the coefficients is the result of a level of public spending below the level required for the size and level of development of the Mexican economy, and that this, in turn, is determined due to insufficient tax revenues.

Palabras llave : H; O12; O47; R42; Public Economics; Microeconomic Analysis of Economic Development; Measurement of Economic Growth; Government and Private Investment Analysis.

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