The authors look at the effect of the composition of government spending on per capita GDP level using Classification of the Functions of Government (COFOG) data. Government spending on education was found to significantly impact per capita GDP in the short term. R&D spending on education and recreation, culture and religion was found to have a significant long-run GDP effect. This paper suggests that developed countries can successfully promote economic growth by redirecting their total spending portfolio toward education and by increasing their R&D spending on education and recreation, culture and religion. IMPACT: By examining the effect on GDP of government spending, the authors have discovered a useful idea for the application and utilization of COFOG data. Their findings have policy implications for achieving sustainable economic growth in developed countries. Developed countries can promote economic growth via recomposition of their total spending portfolio toward education and of their R&D spending toward education and recreation, culture and religion.
- economic growth
- first- and second-level spending data
- government expenditure
- panel analysis