Table of Contents
Economics Research International
Volume 2014, Article ID 709863, 20 pages
Research Article

Public Investments, Human Capital, and Political Stability: The Triptych of Economic Success

Department of Home Economics and Ecology, Harokopio University, 70 El. Venizelou, Kalithea, 17671 Athens, Greece

Received 15 March 2014; Revised 10 August 2014; Accepted 14 August 2014; Published 9 September 2014

Academic Editor: Jean Paul Chavas

Copyright © 2014 Ioannis Kostakis. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


This study assesses the effects of fiscal policy on economic growth in a sample of 96 countries from 1990 to 2010. Ordinary Least Squares (OLS) and Extreme Bound Analysis are mainly estimated in order to investigate whether public investments, human capital, and political stability affect growth controlling for initial output and human capital levels. Furthermore, in this empirical research four subsets of independent variables were used: (a) demographic factors, (b) political determinants, (c) region variables, and (d) variables regarding macroeconomic policy. Empirical results suggest that there is an important difference in the impact of public and private sector investments on the growth of per capita income. Moreover, political indicators such as corruption control, rule of law, and government effectiveness have a high impact on economic growth. Demographic factors, including fertility rate and mortality growth, as well as several macroeconomic variables, like inflation rate index and government consumption, were estimated to be statistically significant factors of economic performance. Fiscal volatility may also be a new possible channel of macroeconomic instability that leads to lower growth. Policy implications of the findings are discussed in detail.