Is There Any Race to the Top of Productive Government Expenditures? Evidence from OECD Countries (1970-1997)

This paper evaluates whether there has been any convergence in government expenditures. The results obtained, by means of the Tukey box-plot, sigma-convergence and conditional beta-convergence, reveal that there is a growing fiscal interdependence among OECD countries. I argue that there is strong evidence of a Òrace to the topÓ of government productive expenditures among OECD countries during the period 1970-1997. The econometric analysis shows that aggregate OECD productive expenditures have pressured countries to increase their own levels of productive expenditures, which might be indicating a competition to attract FDI. In contrast, there is no evidence of convergence in non-productive government expenditures.