PUBLIC EXPENDITURE AND ECONOMIC GROWTH: AN ANALYSIS FOR THE MUNICIPALITIES IN PARANÁ

Abstract

The purpose of this study is to determine how public spending and its components influence the economic growth of the municipalities of Paraná during the period 1999-2011. A data panel of the 399 municipalities is used to estimate linear and quadratic regressions to verify the relations between municipal public spending components and their economic growth. Estimates were made, in their aggregated form, by economic components of expenditure (current and capital), and in a segmented functional category (spending on health, education, defense, transportation and communication). The results show that spending on health, education, transportation and communication are statistically significant and positively related to the growth of the municipalities of Paraná. Current expenditures appear as productive, that is, they stimulate economic growth while capital expenditures have the opposite effect. Quadratic estimates made it possible to derive optimal compositions of public spending that maximize economic growth.