Fiscal policy and Growth in The OECD. Volume II: Appendix.

This paper investigates the impact of taxes and public expenditures on economic growth using panel data for a sample of OECD countries. Our empirical results suggest that fiscal policy influences growth through three main channels. First,the government contributes directly to factor accumulation through public investment in infrastructure and other assets. Second, public expenditure tends to crowd out private investment by reducing private disposable income and the incentive to save. Third, we find evidence of a sizable negative externality effect of government on the level of productivity.