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Diamond, J. (1989) Government Expenditure and Economic Growth: An Empirical Investigation. IMF Working Paper, WP-89-45.
AUTHORS: Koffi Yovo
ABSTRACT: This paper assesses firstly the impact of the level and the composition of public expenditures on growth and secondly the link between public investment and private investment in Togo. For this purpose, a neoclassical growth model and a private investment model were estimated using Two-Stage Least Squares. The findings highlight that during the period 1980-2013, the composition of public expenditures, contrarily to the level, had significant effect on economic growth. In fact, the public consumption had a negative impact whereas public investment had a positive impact on growth. Moreover, the study finds out that increasing public expenditures involves crowding-out effect on private investment. In the light of the results, the paper invites the Togolese government to change the composition of public expenditures by giving priority to the investment with careful arbitrage between private and public expenditures.