LEADER 02869cam a22003735i 4500001 99131234665506421 005 20180915150520.0 006 m d 007 cr cn||||||||| 008 020129s2016 dcu o i00 0 eng^^ 024 7 10.1596/30264 |2doi 035 (CKB)4920000001210922 035 (The World Bank)30264 035 (US-djbf)30264 035 (EXLCZ)994920000001210922 040 DJBF |beng |cDJBF |erda 100 1 Asea, Patrick K. 245 10 Estimating Conditional Functional Multipliers / |cPatrick K Asea. 264 1 Washington, D.C. : |bThe World Bank, |c2016. 336 text |btxt |2rdacontent 337 computer |bc |2rdamedia 338 online resource |bcr |2rdacarrier 347 data file |2rda 490 1 Other papers 520 3 Spending based fiscal adjustment requires decisions on when? and how much to cut public spending to minimise adverce effects on economic growth. This requires precise estimates of the response of output to changes in the functional components of public spending. I call this the functional multiplier.I disaggregate government spending in 36 low-income countries over the Period 1984-2013 into its functional components. Using a GMM-IV model with fuel subsidies as the instrument for government spending I exploit difference in the length of exposure to statehood as a proxy for current absorptive capacity to estimate functional multipliers conditional on absorptive capacity.The estimated functional multipliers vary from -1.11 for economic cervices to 1.82 for social protection. I find that a one standard deviation change in absorptive capacity yields a 18 percent larger multiplier compared to the average level of absorptive capacity. A similar exercise for contestability shows that a one standard deviation change in contestability yields a 14 percent larger multiplier compared to the average level of absorptive capacity. I subject the GMM-IV estimates to a rigorous test to determine whether the estimated relationships an causal and not simply spurious correlation. Post-double LASSO estimates show that that the conditional functional multipliers are precisely estimated and of the same order of magnitude (though slightly larger) than the GMM-IV estimates. To obtain multipliers for individual countries (and not averages) I use a Bayesian iterative shrinkage estimators. The shrinkage estimates show that countries with higher than average absorptive capacity have multipliers that are 15 percent larger than thoce below the average. 650 4 Economic Growth 650 4 Economic Theory And Research 650 4 Fiscal Adjustment 650 4 Fiscal And Monetary Policy 650 4 Fiscal Policy 650 4 Macroeconomics And Economic Growth 650 4 Public Spending 700 1 Asea, Patrick K. 830 0 Other papers. 830 0 World Bank e-Library. 906 BOOK