The effects of public spending composition on firm productivity

Kneller, Richard ; Misch, Florian

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URN: urn:nbn:de:bsz:180-madoc-332818
Document Type: Working paper
Year of publication: 2013
The title of a journal, publication series: ZEW Discussion Papers
Volume: 13-014
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D24 , H32 , H72 , O12,
Keywords (English): Public spending composition , productive public spending , firm productivity
Abstract: This paper exploits the unique institutional features of South Africa to estimate the impact of provincial public spending on health, edu- cation and transport on firm productivity. Our identification strategy is based on within industry-province differences between firms of the effects of public spending. We show that public spending composi- tion affects firm productivity depending on the capital intensity of firms relative to the province-industry mean. Our data and empir- ical specification allow us to rule out that these results are affected by econometric problems that are commonly encountered when es- timating the effects of fiscal policy and by unobserved industry- or province-specific productivity shocks. In contrast to related existing microeconomic evidence, we take into account the government budget constraint so that our results have clear policy implications.

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