The Composition of Public Expenditure and Economic Growth: Can Anything be Learned from Swiss Data?

Using time-series tests, the paper provides evidence that fiscal spending can influence long-run growth. Data on six functional categories of public spending (education, health care, social welfare, transport, justice and national defense) over the period 1950 to 1994 are examined for Switzerland. Permanent growth effects are found only for two expenditure categories: education (positive) and health care (negative). In addition, higher spending on transport infrastructure and on defense appear to exert a temporary influence.