THE IMPACT OF PRODUCTIVE AND UNPRODUCTIVE GOVERNMENT EXPENDITURE ON ECONOMIC GROWTH IN OECD COUNTRIES

The aim of this article is to support or refute the hypothesis of the existence of a positive relationship between productive government spending and economic growth, or the hypothesis of a negative relationship between unproductive government spending and economic growth in OECD countries. The analysis is based on the neoclassical growth model extended by human capital and the structure of government spending. Government expenditures are examined according to their functional classification (COFOG). Econometric analysis is carried out by a panel regression based on annual time series for the period 2000-2011. The results of empirical analysis show the negative relationship of unproductive government spending and economic growth. A positive relationship has been confirmed between productive government spending and economic growth only in the case of spending on defence and public order and safety.