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Abstract
In the late 1950s, Richard Musgrave made the case for a “three-function framework” which has influenced the way economists approach fiscal policy and its objectives to this day. This framework suggests that government activity should be separated into three branches, namely macroeconomic stabilization, resource allocation, and income redistribution. The stabilization branch is to assure the achievement of high employment and price stability, the allocation branch is to see that resources are used efficiently, and the distribution branch is to achieve an equitable distribution of income. (Musgrave, 1959). The present chapter is concerned specifically with the performance of commodity-exporting countries in terms of macroeconomic stability and long-run economic growth, based on an examination of a new dataset on nonresource GDP from a panel of up to 134 countries during the period 1970–2007.1, 2
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