Effects of Public Spending on Economic Growth: An empirical approach in Latin American countries. Period 2006 – 2019

Abstract

The objective of this research is to empirically examine the influence of gross capital formation (GFK), public spending on education, spending on research and development (R&D), the number of companies and tax collection, in economic growth, evaluating these variables in the economy of twelve Latin American countries in the periods 2006 to 2019. For this, static panel models (fixed effects and random effects) and dynamic panel (Generalized Method of Analysis) were used as econometric methodology. Moments – GMM), in order to establish the best model that presents the estimators, where the two-step GMM system is more consistent and significant. The results found that gross capital formation, spending on education and taxes significantly influence economic growth, while spending on R&D and the number of companies negatively influence economic growth. Coming to the conclusion that spending on education generates growth in the economies of Latin American countries, this is due to lagging economic growth and tax collection, but there is a lack of information on why spending on R&D, taxes, company numbers, generates a negative impact, which is why studies that evaluate factors that influence these variables are recommended.