Title: Evaluating short- and long-term effectiveness of capital expenditure in the subnational governments: evidence from US states

Authors: Sungchan Kim

Addresses: Local Finance Research Center, Korea Research Institute for Local Administration, Wonju, South Korea

Abstract: Over the decades, the importance of capital expenditure has been increasingly discussed because capital expenditure can increase the capacity or efficiency of an organisation in both the short- and the long-term. However, few previous studies have focused on the effectiveness of capital expenditure on economic growth at the subnational level, such as that of state governments in the USA. Thus, in this paper, I investigate whether capital expenditure in US state governments is effective in terms of economic growth. In addition, this paper aims to examine the effectiveness of capital expenditure in both the short and the long-term. The empirical results suggest that capital expenditure has a positive impact on economic growth in the short and the medium term. Therefore, for subnational governments such as state governments in the USA, increase in capital expenditure is an influential fiscal tool for economic growth.

Keywords: capital expenditure; economic growth; fiscal policy for subnational governments; short- and long-term effectiveness of fiscal policy.

DOI: 10.1504/IJEBR.2018.094011

International Journal of Economics and Business Research, 2018 Vol.16 No.2, pp.182 - 195

Received: 16 May 2017
Accepted: 11 Jun 2017
Published online: 13 Aug 2018 *

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