The Quality of Growth : Fiscal Policies for Better Results

This paper reviews recent empirical studies linking the nature of public expenditures and taxes with the quality aspects of growth – its impact on poverty, income distribution, and the environment. The studies reviewed confirm that more spending on public goods and concomitantly less spending in private goods (in good measure comprising non-social subsidies) are associated with growth that is faster and better for poverty reduction, income equality and environmental sustainability. Such an approach calls for a shift in government spending toward the provision of public goods, and away from subsidies for private goods that provide incentives for depletion of resources and concentration of income. The reallocation allows total government spending to be kept constant in order to ensure macroeconomic stability. This review is an initial effort to encourage deeper studies on how fiscal policies could improve both the quality and quantity dimensions of economic growth