O40 - Economic Growth and Aggregate Productivity: GeneralReturn

This paper examines the impact of fiscal policy on economic growth depending on the institutional conditions in the OECD countries over the time period 2000-2012. The analysis is based on the methods and tests of panel regression. From the analysis results it is evident that in the case of government spending there is (1) positive impact on economic growth in the countries with lower fiscal transparency; (2) negative impact in countries with higher fiscal transparency. In less developed countries there is higher proportion of pro-growth spending within total government spending. On the other hand in more developed countries the Wagner law becomes valid with the existence of welfare costs. In the case of taxation impact on economic growth it is visible that (3) the negative impact of taxation is more harmful for economic growth in the countries with worse institutional conditions. The explanation of this result can be linked to different fiscal transparency and different economic level.