Resumen de Public Spending and Its Impact on the Pre-WWII Greek Economy: A Comparative Analysis for Civilian and Military Expenditure

Christos Kollias, Michel S. Zouboulakis, Suzanna Maria Paleologou, Panayiotis Tzeremes

• This paper examines the economic effects of public spending on Greek economic growth over the period 1842-1938. In less devel- oped countries, such as late-19th - and early-20th -century Greece, pub- lic spending played an important role in the construction of key infrastructures and the provision of basic public health and education systems. Such expenditures augment physical and human capital, enhancing aggregate production possibilities and boosting growth and development. As has been shown, the composition of public spending can be an important determinant of its impact on a coun- try’s level of economic development. To test for such differential com- position effects, the Greek public spending time series was divided into two broad categories: civilian and military expenditure. The results reported here point to a significant positive effect on growth in the case of civilian expenditure but not for military spending.