General Government Expenditures Research Articles

The Impact of Economic Openness on the Vertical Structure of the Public Sector

The aim of this paper is to investigate the impact of economic openness on the vertical structure of the public sector within a country. To tackle this issue we set up a simple theoretical model of fiscal federalism, where both central and local public spending enter the objective functions of both a central government and an aggregate local public sector, accommodating a wide range of behaviours. The degree of economic openness is assumed to erode central tax revenues and through this channel to affect the size of central spending, the size of grants paid to local governments and the optimal amount of local public spending. Consequences on the degree of decentralization are investigated. The main findings are that for a large subset of parameters an increase in economic openness leads to: a) a lower level of central government expenditures; b) a lower level of general government expenditures; c) a higher level of local taxation; d) a higher degree of public sector decentralization. (This abstract was borrowed from another version of this item.)

An overview of health financing patterns and the way forward in the who african region

The way a health system is financed affects the performance of its other functions of stewardship, input (or resource) creation and services provision, and ultimately, the achievement of health system goals of health improvement (or maintenance), responsiveness to people's non-medical expectations and fair financial contributions. To analyse the changes between 1998 and 2002,in health financing from various sources; and to propose ways of improving the performance of health financing function in the WHO African Region. A retrospective analysis of data obtained from the World Health Report, 2005. The analysis reported in this paper is based on the National Health Accounts (NHA) data for the 46 WHO Member States in the African Region. The data were obtained from the World Health Report 2005. It consisted of information on: levels of per capita expenditure on health; total expenditure on health as a percentage of gross domestic product (GDP); general government expenditure on health as a percentage of total expenditure on health; private expenditure on health as a percentage of total expenditure on health; general government expenditure on health as a percentage of total government expenditure; external expenditure as a percentage of total expenditure on health; social security expenditure on health as a percentage of general government expenditure on health; out-of-pocket expenditure as a percentage of private expenditure on health; and private prepaid plans as a percentage of private expenditure on health. The analysis was done using Lotus SmartSuite software. The analysis revealed that: fifteen countries spent less than 4.5% of their GDP on health; forty four countries spent less than 15% of their national annual budget on health; sixty three percent of the governments in the Region spent less than US$10 per person per year; fifty per cent of the total expenditure on health in 24 countries came from government sources; prepaid health financing mechanisms cover only a small proportion of populations in the Region; private spending constituted over 40% of the total expenditure on health in 31; direct out-of-pocket expenditures constituted over 50% of the private health expenditure in 38 countries. Every country needs to develop clear pro-poor health financing policy and a comprehensive health financing strategic plan with a clear roadmap of how it plans to transit from the current health financing state dominated by inequitable, catastrophic and impoverishing direct out-of-pocket payments to a visionary scenario of universal coverage. The strategic plan should strengthening of health sector advocacy and health financing capacities, health economics evidence generation and utilisation in decision-making, making better use of available and expected resources, monitoring of equity in financing, strengthening of the exemption mechanisms, managed removal of direct out-of-pocket payments (for countries that choose to), and improving country-led sectoral coordination mechanisms (e.g. Sector Wide Approaches).

What Do We Really Know about Fiscal Sustainability in the EU? A Panel Data Diagnostic

We assess the sustainability of public finances in the EU15 using stationarity and cointegration analysis. Specifically, we use panel unit root tests of the first and second generation allowing in some cases for structural breaks. We also apply modern panel cointegration techniques developed by Pedroni (1999, 2004), generalized by Banerjee and Carrion-i-Silvestre (2006) and Westerlund and Edgerton (2007), to a structural long-run equation between general government expenditures and revenues. While sustainability may be lacking in individual cases, fiscal policy was overall sustainable both for the EU15 panel set, and within some sub-periods.

What Do We Really Know about Fiscal Sustainability in the EU? A Panel Data Diagnostic

We assess the sustainability of public finances in the EU15 over the period 1970-2006 using stationarity and cointegration analysis. Specifically, we use panel unit root tests of the first and second generation allowing in some cases for structural breaks. We also apply modern panel cointegration techniques developed by Pedroni (1999, 2004), generalized by Banerjee and Carrion-i-Silvestre (2006) and Westerlund and Edgerton (2007), to a structural long-run equation between general government expenditures and revenues. While estimations point to fiscal sustainability being an issue in some countries, fiscal policy was sustainable both for the EU15 panel set, and within subperiods (1970-1991 and 1992-2006).

Do supermajority rules limit or enhance majority tyranny? evidence from the US States, 1960–1997

Buchanan and Tullock (1962) demonstrates that supermajority rules can reduce tyranny of majority problems in a democracy. However, recent theoretical work by Dixit, Grossman, and Gul (2000) postulates that this static analysis of supermajority rules may be inadequate to explain political decisions in a dynamic setting. In fact, supermajority rules may increase the incidence of majority tyranny because of rotating political representation. Using data from US state legislatures we examine the effect of supermajority rules on different categories of government expenditures and tax revenues during the latter half of the 20th century. We find supermajority rules have little effect on general government expenditures and tax revenues. However, supermajority rules are associated with lower public welfare transfers, which supports the traditional analysis of the fiscal effects of supermajority rules.

General elections and government expenditure cycles: Theory and evidence from the UK

This paper presents a testable theoretical framework that extends the standard demand-side approach to modelling government expenditure on goods and services. The focus is on the adjustment of expenditure to disequilibria: we investigate whether the adjustment of UK exhaustive government expenditure between 1966 and 2002 to its long-run equilibrium path is symmetric. The evidence points to asymmetric adjustment to the demands of a representative voter over the election cycle but not between Labour and Conservative governments. Convergence to equilibrium is faster during the later stages of each election cycle.

Beyond the demand: the importance of supply-side and institutional factors in the growth of governments

Traditional empirical studies on the growth of government focus on the demandside, or, alternatively, build multivariate models based on several possible explanations. The demand-side alone has difficulty explaining the growth of government, on the other hand, multivariate estimates have the drawback that, given the scarce availability of time-series observations on public expenditure, they have low degrees of freedom. The method of analysis proposed here consists of considering a parsimonious model that includes the supply-side and the institutional framework as further explanatory variables for the growth of government. Empirical testing for Italy shows the existence of a long-run relationship between general government expenditure and domestic product only when the proposed model is enhanced by a measure of bureaucratic power and by an institutional factor that captures the division of competencies between local and central government in allocating public expenditure.

The Role of Omitted Variables in Identifying a Long-run Equilibrium Relationship for the Italian Government Growth

We discuss the role of omitted variables in the long run empirical modeling of the Italian government growth based on a Wagner's Law framework. We identify a non-spurious long-run relationship between general government expenditure and domestic product only when our Wagner's Law model is enhanced by a measure of bureaucratic power, as a supply-side variable, and by the ratio of local to state expenditure, as an institutional factor that captures the division of competencies between local and central government in allocating public expenditure. This result is independent from the Wagner's Law specification chosen. The persistence profile analysis shows a slow adjustment to equilibrium for the estimated government growth relationship following system-wide shocks, pointing to rigidities and complex functioning of the public sector.

A Multivariate Approach to the Growth of Governments

The Italian general government expenditure is empirically modeled by considering demand-side, supply-side, and institutional factors. The authors estimate a long-run relationship with government expenditure driven by the demand-side and supply-side effects of domestic income and bureaucratic power, respectively, as well as by an institutional factor, namely, the decentralization of public expenditure. The disequilibrium error positively affects income growth and local spending, implying that when government expenditure is above its equilibrium level, both economic growth and local governments benefit. However, tighter government spending within the European Monetary Union environment suggests that local governments will have to become more efficient to find additional resources for their financing.

Effects of government spending on private investment

This paper investigates the effects of military and non-military public expenditures on gross private investment using cointegration and error-correction analysis. The latter type of public spending is disagreggated into expenditures of infrastructure, consumption and other general government expenditures. The empirical evidence from four emerging European countries namely, Greece, Ireland, Portugal and Spain suggests that in some cases public capital spending stimulates investment, while in others it depresses it. Also, the results tentatively indicate that defence spending exerts no influence on private investment, thus adding to the ongoing controversy of the economic effects of military spending.

Does higher government spending depress private investment?

This paper explores the implications of military and nonmilitary government expenditures on gross private investment. The empirical investigation of the issue is carried out via cointegration and error–correction analyses. The second type of public spending is disaggregated into infrastructure, consumption and other general government expenditures. The evidence from four emerging European countries namely, Greece, Ireland, Portugal and Spain, suggests that in some cases public capital spending complements and stimulates investment, while in others it discourages it. Moreover, the results tentatively indicate that defense spending does not impact private investment, thus contributing to the continuing debate of the economic effects of military spending.

STEERING PUBLIC EXPENDITURE WITH DEFECTIVE MAPS

Governments control public expenditure on definitions different from those of General Government Expenditure, the national accounts aggregate. After a prolonged period of relatively stable definitions for its public expenditure control aggregate, the UK government has recently revised this twice, substituting the New Planning Total for the Old Planning Total in 1990 and then moving in 1993 to the New Control Total. This article evaluates the justifications offered for these revisions and evaluates alternative explanations. The search for presentational gains and recourse to definitional change as an escape from problems feature prominently among the latter. Moreover, the fundamental ongoing changes in the form of public service delivery have major implications for the articulation of delivery agencies with public expenditure planning. There has been a marked loss of information and of transparency, notably with regard to forward information about function and economic category. Data continuity has been broken, and year‐on‐year changes to cash plans cannot be properly analysed. Transferring expenditure away from general government to where it is‘out of reach’in the expectation of efficiency gains further complicates monitoring. The channels of public accountability are blocked, in part by information overload and in part by information suppression. The existing arrangements, whether by accident or design, confer enormous discretion upon UK government through control of information flows.

What Can We Afford For the National Health Service?

AbstractThe annual Gross Domestic Product (GDP) is here used as a standard measure against which to compare expenditure on Health & Welfare and Defence budgets, between Conservative and Labour governments and the four largest EC countries 1973/4‐1993/4.An analysis of Mrs Thatcher's governments’ expenditure shows that proportionately less GDP went to General Government Expenditure (GGE) than all the other European Community countries. Mrs Thatcher's first government maintained the unprecedented level of GDP devoted to Health reached in 1978/79, but successive administrations began to reduce, and, plan further reductions of GDP for the NHS. Relative decreases of GDP were also found in relation to expenditure on Social Security, Housing, and Personal Social Services and Defence.The governments of France, Germany and Italy provided more of their GDP to health than Britain, whilst at the same time we spent more on Defence and Law & Order & Public Safety. This raises the question: what can we afford for the NHS?A review of demographic changes shows that the British infant and elderly population, who are associated with demands for health, were proportionately more numerous than in France, Germany and Italy. This suggests the need for more UK health expenditure if Britain is to meet current and future needs.

On the size of the public sector

The paper discusses the concept of the ‘size’ of the public sector and the problems of measuring it. Noting that the 1986 Public Expenditure White Paper selects the ratio of general government expenditure to GDPmp as the suitable measure, the paper pinpoints the adjustments to the National Income Accounts definition of government expenditure that need to be made in order for it to be an accurate measure of total expenditure actually incurred. When these adjustments are made, the public sector is found to be larger, and growing more quickly, than the Public Expenditure White Paper definition suggests.

The growth of public expenditure in the United Kingdom, 1960-86

This paper investigates the growth of government expenditure in the United Kingdom over the period 1960-86. Three features of this growth stand out. First, general government expenditure has grown, in real terms, over the past 25 years, at a rate faster than real GDP; as a consequence it has also grown as a percentage of GDP. Second, the impetus for expenditure growth has been provided by transfer payments and spending on health and defence, and finally attempts to control expenditure have fallen mainly on investment plans. The paper then goes on to examine various explanations for this growth in expenditure. After examining the role of demographic, social, economic and political factors, the paper concludes that an important additional reason lies in the failure to control expenditure. Thus a large part of the expenditure growth has not been planned but instead has arisen out of a failure of the institutional machinery designed to control such expenditure to ensure that expenditure outturns do not exceed plans.

Comparing evidence on Wagner's hypothesis from conventional and ‘real’ data

Conventional and internationally comparable data for 34 countries are utilized to assess the relationship between general government expenditure and income. While the conventional data can be deemed as mildly supportive of Wagner's hypothesis, evidence from the ICP data suggests a decline in the share of general government as income per capita rises.

Public Expenditure and Economic Performance in OECD Countries

ABSTRACTThis paper presents data on the size and growth of general government expenditures and receipts relative to GDP in OECD countries over the 1960–81 period. A feature of these trends is the widespread appearance of budget deficits in the mid-seventies, following the sharp increase in government expenditures relative to GDP in the two years immediately after the first oil shock in 1973. Having presented these data, the paper tests several hypotheses relating the size and growth of government to macroeconomic performance using an international cross-section framework. The economic performance indicators used are the rate of economic growth, the rate of consumer price inflation and private sector employment growth. Overall, the results provide little evidence that government size and growth have been detrimental to economic performance, particularly in the period since 1975, although an inverse relation existed in the sixties between government size and economic growth.