Experimental Use Of a Market-Based Approach to the Efficient Allocation of Resources within the Government Budget

Vladimír Štípek

doi:10.18267/j.aop.624

Abstract

The aim of this article is to test the possibility of a more efficient allocation of resources using market tools when proposing the government budget. The tool is the distribution of ownership rights when designing individual chapters of the budget at the specific stage of the government budget finalisation. The assumption is that the exchange of ownership rights between the individual chapters would lead to a more efficient allocation of resources than mere negotiation. The precondition is the correct setting for such negotiation. For this reason, the article uses an economic experiment in which three budget chapters of expenditure (industry, education, transport) can exchange ownership rights with allocated funds for the following areas: salary expenditure, investment, current expenditure. The design of the experiment is based on a review of relevant studies and literature; illustrative data used in the experiment correspond to the current reality. The article shows these innovative possibilities based on the conducted experiments where the roles were divided between the group of participants representing the individual ministries while the needs and possibilities of the ministries to exchange resources were defined within a set framework of the experiment rules and using the government budget of the Czech Republic for 2020 as the example. The article also implies the possible applications of this method. This method is generally applicable under the proper method design.

Highlights

This article responds to the implicit problem pertaining to public budgets: a constant increase in expenditure, e.g. due to the need to finance newly emerging programmes, without the existing ones being cut
The mentioned use of market principles conforms to a simple rule: the funds are divided among all the players involved according to basic categories: operational expenditures, salary expenditures, investment expenditures
It is clear that the overall budget increased by almost 10% compared to the preliminary plan in the medium term

Summary

Introduction

This article responds to the implicit problem pertaining to public budgets: a constant increase in expenditure, e.g. due to the need to finance newly emerging programmes, without the existing ones being cut. The mentioned use of market principles conforms to a simple rule: the funds are divided among all the players involved (in terms of the Czech budget, the budget chapters) according to basic categories: operational expenditures, salary expenditures, investment expenditures (i.e. acquisition expenditures). In these categories, the actors will be able to make exchanges among themselves in a 1:1 ratio, ensuring a more efficient allocation of funds. The actors will be given a certain right of ownership allowing them to decide, at their own discretion, whether to retain the entrusted funds or to exchange them

Objectives

Methods

Results

Discussion

Conclusion