Is there any race to the top of productive government expenditures? Evidence from OECD countries. European Political Economy Review Vol. 3, No. 2 (Winter 2005-2006), pp. 29-52

Sanz, Ismael. (2006) Is there any race to the top of productive government expenditures? Evidence from OECD countries. European Political Economy Review Vol. 3, No. 2 (Winter 2005-2006), pp. 29-52.

Abstract

This paper evaluates whether there has been any convergence in government expenditures. The results obtained, by means of the Turkey box-plot, s-convergence and conditional β-convergence, reveal that there is a growing fiscal interdependence among OECD countries. I argue that there is strong evidence of a “race to the top” of government productive expenditures among OECD countries during the period 1970-1997. The econometric analysis shows that aggregate OECD productive expenditures have pressured countries to increase their own levels of productive expenditures, which might be indicating a competition to attract FDI. In contrast, there is no evidence of convergence in non-productive government expenditures.