Changes In Expenditure Composition Research Articles

Political Budget Cycle and Financial Losses: An Indonesian Case

This study aims to test the Political Budget Cycle (PBC) in Indonesia as one of the world's largest democracies, specifically testing the presence of PBC across types of local government expenditures. This study further analyzed the effect of changes in expenditure composition during election years on financial local government losses. The financial losses are defined as irregularities in regional finance management found in the Audit Board of The Republic of Indonesia (BPK) audit report. This study uses the data at the district and city levels (local expenditures and financial losses) from 2014 to 2019 and adopts a fixed-effect panel data specification. The empirical estimations show the following evidence: (1) PBC phenomenon occurs in Indonesia, especially on government grants (belanja hibah), expenditure on goods and services, and capital expenditures; (2) There was no difference in PBC behavior between a region having an incumbent running for re-election and a region with incumbents from the previous election; (3) The existence of PBC tend to increase local government (financial) losses.

Does 25 cents more per day make a difference? The impact of livestock transfer and development in rural Zambia

Analyses of the impacts of asset transfer programs often find statistically significant effects on consumption expenditures that are large in percentage terms but small in absolute value. This study explores the practical significance of such impacts using the case of a livestock transfer program among impoverished households in Zambia. As in other studies, results show that the asset transfers increased household consumption expenditure and dietary diversity. Extending previous work, this paper examines whether the increase in expenditures has been large enough to trigger changes in consumption patterns or in subjective assessment of poverty status. Changes in composition of expenditures, composition of diet, and subjective self-assessment of poverty all suggest a growing sense of security and a practically significant change in welfare for treated households. As transfers included three different types of animals – dairy cows, meat goats, and draft cattle – we are able to discern that the specific nature of the asset transferred influences food security impacts. Examination of change in the composition of consumption shows substantial effects on poverty and food security starting within six months of livestock transfers. Persistence of the impact through the next 18months of our study period indicates that livestock transfers can have a sustained effect on poverty and food security.

Electoral Opportunism and Vertical Fiscal Imbalance

Evidence of political budget cycles from cross-country studies has been rationalized as coming from the voters' cost to process the available information and asymmetric information. This explanation has also been adopted in most cross-province studies, leaving aside variables related to the incentive structure of fiscal federalism. This paper investigates electorally induced fiscal fluctuations in Argentina for the period 1985–2007. Province-level dynamic panel data reveal that vertical fiscal imbalances in subnational districts fuel fiscal expansion and changes in expenditure composition, favoring current expenditure to the detriment of investment, in election years. Vertical fiscal imbalances make electoral opportunism cheaper and more profitable.

Excluding the Rural Population: The Impact of Public Expenditure on Child Malnutrition in Peru

Why is the urban-rural gap in child malnutrition increasing in Peru despite government efforts to improve the provision of public services? To answer this question, the impact of regional public expenditure in Peru on young children's nutritional outcomes is examined. To account for policy endogeneity, public expenditures are instrumented using unanticipated regional mining revenues. Even after accounting for changes in expenditure composition due to increases in mining revenues, public spending has a significant and positive impact on children's outcomes only in urban areas. However, even in urban areas, barriers exist that diminish the effectiveness of public expenditure, so indigenous and frailer children in these areas do not benefit from public spending. These children face constraints that limit their ability to use public services. This result reveals the paramount importance of initial conditions. In rural areas, possibly because of the lower quantity and quality of public services, there is no positive effect for any children.

Elections, leaders, and the composition of government spending

Do elections allow voters to express their policy preferences, with change in government spending patterns following the election of a new leader? How long does it take for the composition of government spending to change following a change in leadership? Or, do significant spending changes precede (rather than follow) elections, with incumbents using significant changes in spending composition as an electoral tool? Using a dataset we created on government expenditure composition in 71 democracies over 1972–2009, we examine the relation between elections and significant changes in the composition of government spending. We find that leaders' replacements have no significant short-run effect on expenditure composition, even after controlling for various political and economic variables. Over the medium-term leadership changes are associated with larger changes in expenditure composition, but only in developed countries. We also find that election years are associated with larger expenditure composition changes in established democracies, but not in new democracies, which were found in our previous work to increase their overall level of expenditures in election years.

Excluding the Poor: The Impact of Public Expenditure on Child Malnutrition in Peru

Why is the urban-rural gap in child malnutrition increasing in Peru despite government efforts to improve the provision of public services? To answer this question, the impact of regional public expenditure in Peru on young children's nutritional outcomes is examined. To account for policy endogeneity, public expenditures are instrumented using unanticipated regional mining revenues. Even after accounting for changes in expenditure composition due to increases in mining revenues, public spending has a significant and positive impact on children's outcomes only in urban areas. However, even in urban areas, barriers exist that diminish the effectiveness of public expenditure, so indigenous and frailer children in these areas do not benefit from public spending. These children face constraints that limit their ability to use public services. This result reveals the paramount importance of initial conditions. In rural areas, possibly because of the lower quantity and quality of public services, there is no positive effect for any children.

Composition of Government Expenditure, Human Capital Accumulation, and Welfare

This paper uses a dynamic general equilibrium model calibrated to Ugandan data to examine the welfare effects of alternative scenarios of government expenditure and tax financing. Two expenditure types are considered: social spending that affects human capital, and infrastructure expenditures that affect productivity. The paper finds that social expenditures lead to higher economic growth depending on the form of financing; young generations benefit most from social spending financed by consumption taxes; agents do not substitute between human and physical capital as a result of changes in expenditure composition; and improving the productivity of fiscal expenditure is both growth and welfare enhancing.

Composition of Government Expenditure, Human Capital Accumulation, and Welfare

This paper uses a dynamic general equilibrium model calibrated to Ugandan data to examine the welfare effects of alternative scenarios of government expenditure and tax financing. Two expenditure types are considered: social spending that affects human capital, and infrastructure expenditures that affect productivity. The paper finds that social expenditures lead to higher economic growth depending on the form of financing; young generations benefit most from social spending financed by consumption taxes; agents do not substitute between human and physical capital as a result of changes in expenditure composition; and improving the productivity of fiscal expenditure is both growth and welfare enhancing.