We estimate the income elasticity of government expenditures using variation in the international oil price as a plausibly exogenous source of within-country variation of countries' permanent income. Our short run elasticity estimates, between 0.25-0.50, are generally somewhat smaller than the...

We estimate the income elasticity of government expenditures using variation in the international oil price as a plausibly exogenous source of within-country variation of countries’ permanent income. Our short run elasticity estimates, between 0.25-0.50, are generally somewhat smaller than the...

This paper provides instrumental variable estimates of the permanent income elasticity of government expenditures. It uses annual variation in the international oil price weighted with countries' average oil net-export GDP shares as a plausibly exogenous source of within-country variation in...