An Exploration into the Effects of Fiscal Variables on Regional Growth

This paper explores the effects of several fiscal variables on regional economic growth in Spain over period 1965-1997. Panel estimates are provided for this sample. The results show that public consumption affects negatively growth, public investment exerts a positive (but non significant) effect on growth rate and public deficit reduces private investment and hence economic growth. The effects of taxes and social benefits seem not to be beneficial for regional growth. Alternative estimates to deal with specification problems are considered.