Does government spending boost economic growth in Europe?

Abstract

The article aims to analyse the evolution of budgetary expenditures and their relationship with economic growth, especially in the EU countries and three non-EU countries - Switzerland, Norway and Iceland during 1991 - 2012. To test the link between government spending and economic growth the research used the United Nation Classification of the Functions of Government and three econometrical regression methods – ordinary least square, least squares dummy variable and the generalized method of moments. Statistical results for the 10 categories of expenditure have shown that economic affairs, environmental protection, recreation, culture and religion and social protection have a significant impact on economic growth. Also the recent economic crisis and the EU accession influenced the variation of GDP/capita.