Relationship between public expenditures and economic growth in budget constraint

Abstract

This paper investigates relationship between public expenditures and economic growth in budget constraint. Public expenditures are divided into productive expenditure and unproductive expenditure. The budget constraint is conditional on public debt and fiscal balance. Based on the panel data of 66 developing countries in the period of 1998 -2106, the study find that fiscal surplus enhances the growth effects of public unproductive expenditure and public productive expenditure, while the growth effect of public debt is only significant in the case unproductive expenditure when it exceeds 17.025% GDP.