An Analysis of the Convergence of the Composition of Public Expenditures in European Union Countries

The literature on fiscal policies is paying increasing attention to the impact of the composition of public expenditures on long-term economic growth. Public policy endogenous growth models recommend to change the composition of public expenditures to items considered productive expenditures. In this sense, European institutions are encouraging the rise in the share of productive outlays like public investments, R&D, and active labor market policies, among others. The article analyzes whether these recommendations are followed by European Union countries and whether a convergence to a new pattern of public finances with a higher share of those items considered productive expenditures by European institutions is arising.