of GDP during 2000-2005, reflecting an increasingly predominant role of the public sector through the decades. However, since Botswana is ranked very highly, at 73.9 in 2006, on government effectiveness and 78.2 on control of corruption, it can be inferred that, despite the predominant role of the government in the economy, transparency and good governance have not been undermined.

On the opposite side of the spectrum we find Singapore which has managed to maintain a small share of public spending to GDP during the four decades of analysis, reaching an average ratio of 16.58% in 2000-2005, one of the lowest and most stable ratios in the world, despite continuous increases in GDP per capita.

With respect to government spending composition, according to the traditional functional classification of expenditures, it is interesting to notice that while economic spending<sup>13</sup> , including infrastructure, agriculture, energy, etc., predominated in the first decades, the percentage of the total budget allocated to social expenditures<sup>14</sup> has been rising over time in all seven countries, with no exceptions, to represent the highest share of the total budget by 2000. Such increases are particularly significant in Botswana, Indonesia, Korea, Singapore, and Thailand.

In the cases of Botswana and Indonesia, a priority switch towards social spending has been achieved through a decrease in economic and other categories of expenditures which were higher at earlier stages of development, particularly during the 1970s when building physical capital through basic infrastructure was required to jump start the growth process. In the other five countries we observe parallel decreases in defense and general services spending, while economic spending continues being important, although not predominant.

When using the definition of Bleany at al.<sup>15</sup> , which distinguishes _a priori_ between productive and unproductive expenditures, all countries in our sample show a clear predominance of productive spending, which is sustained through the decades of analysis, with some fluctuations by country as expected.

Regarding fiscal stability, none of the above countries is characterized by relatively large fiscal deficits<sup>16</sup> , at least when using the conventional approach to measuring it<sup>17</sup> . Despite their spending increases at times of low private investment flows, some interventionist approaches to industrial policy, financial crises, ad hoc countercyclical spending, and

> 13 Economic public spending includes: fuel and energy; agriculture, forestry, fishing, and hunting; mining, mineral resources, manufacturing, and construction; transportation and communication; and other economic affairs and services.  For the central government.  IMF GFS.

> 14 Social public spending includes: education; health; social security and welfare; housing and community amenities; and recreational, cultural, and religious affairs.  For the central government. IMF GFS

> 15 According to this definition, productive spending includes: general public services; defense; education; health; housing; and transportation and communication.  See Section III.

> 16 Malaysia shows the highest fiscal deficits at 5.40% of GDP in 2000-2005

> 17 This definition of fiscal deficit refers only to the difference between total revenues (including grants) and expenditures net of lending for the consolidated central government.  It does not include flows at subnational levels and contingent liabilities that have not been reflected in the government budget.

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