Level Of Public Expenditure Research Articles

The composition of public expenditure and economic growth

Noting that the literature has focused on the link between the level of public expenditure and growth, we derive conditions under which a change in the composition of expenditure leads to a higher steady-state growth rate of the economy. The conditions depend not just on the physical productivity of the different components of public expenditure but also on the initial shares. Using data from 43 developing countries over 20 years we show that an increase in the share of current expenditure has positive and statistically significant growth effects. By contrast, the relationship between the capital component of public expenditure and per-capita growth is negative. Thus, seemingly productive expenditures, when used in excess, could become unproductive. These results imply that developing-country governments have been misallocating public expenditures in favor of capital expenditures at the expense of current expenditures.

Politics and Deficit Finance

The government faces both economic and political constraints on its ability to raise revenue. Political factors can limit the government's revenue-generating ability to levels below those dictated by economic constraints. Taxation is more directly constrained by the political process than deficit finance because taxes are voted on directly by the legislature. Deficits are a residual that results from the aggregation of all tax and expenditure bills. Increased electoral safety weakens the political constraint against deficit finance because the only electoral check on deficit finance occurs when representatives run for reelection. Empirical estimates show that the increased security of incumbents has contributed to increases in deficit finance and has increased the overall level of public expenditures.

Health reform in Greece: planning and implementation of a national health system.

The health system in Greece has for many years been in a state of continuous crisis. The basic aspects of this crisis involve: a fragmented administrative framework; low level of public expenditure; a significant private sector; inadequate hospitals; skewed manpower; and, a low level of primary care. In 1983, the National Health System (ESY) was established, as an effort to improve the above situation. This article presents the context of the ESY and the situation of the health system prior to and after the establishment of the ESY. The conclusion drawn is that many of the goals of the ESY have not been achieved or only partly achieved, and that a number of the above serious problems still persist.

TERRITORIAL PUBLIC EXPENDITURE IN THE UNITED KINGDOM

Although the devolution plans of the 1970s were abandoned, those debates had far‐reaching consequences for the determination of relative public expenditure levels in the United Kingdom. The Barnett formula (10:5:85) of 1978 provided that increases in public expenditure in Scotland and in Wales for specific services within the territorial blocks would be determined according to the formula consequences of changes in equivalent English expenditure. A parallel formula allocated 2.75 per cent of the change in equivalent expenditure in Great Britain to Northern Ireland. The essential distinction is between base expenditure (whose current levels are carried forward) and incremental expenditure (which is determined by formula). The predicted convergence of block expenditure relatives on the LJK per capita average was frustrated by formula bypass, and in Scotland by relative population decline. The background to the 1992 recalibration of the Barnett formula (10.66:6.02100.00 and Northern Ireland 2.87 per cent) is analysed. Territorial block expenditure is set within the structure of territorial public expenditure aggregates, and evidence is assembled on identifiable public expenditure relatives between countries and by English region.

Public expenditure policies in spain for the 1990s: structural changes, social demands and the budgetary process

Over the last fifteen years, Spain has undergone a profound transformation in almost all aspects of its social organization. This change has been sharply reflected in the level and composition of public expenditure, which have not always been adjusted perfectly to new social demands. This has created tension which, among other consequences, has encouraged the revision of the methods of allocation, management and control of public resources. This article describes and explores some characteristics of this process, and sets out the principal guidelines which may shape the future reform of these methods.

Public hospital activity, expenditure and staffing levels for indigenous and nonindigenous settlements in remote Queensland

Aborigines and Torres Strait Islanders who live in discrete communities have poor health. Their life expectancy is relatively low and the underlying rates of morbidity, mortality and hospitalisation are much higher than the Australian average. For Aborigines and Torres Strait Islanders in the remote communities, the mortality rate is some three times higher than that of the total population. By comparing remote Aboriginal and Torres Strait Islander communities with similarly remote nonindigenous settlements, the paper shows that there was greater hospital activity per person in remote Aboriginal and Torres Strait Islander communities. Paradoxically, whereas there was greater hospital activity in discrete indigenous communities, there was lower expenditure per person on hospital services. The paper finds also that there were fewer medical and nursing staff per person in remote Aboriginal and Torres Strait communities.

A cell based approach to modelling public expenditure.

The paper examines the use of a cell based model to analyse the effects of demographic change on the level and distribution of public expenditure. The nature and advantages of a cell based model for this purpose are described. The level and distribution of the key components of welfare state expenditure--health, education, social security--and of direct taxes, is examined for the base year of 1985. The net transfer of resources is compared to the distribution of income across cells. The effect of demographic change on the level and distribution of health and education expenditure is analysed. Issues in the further development of this approach are then reviewed.

Rules, discretion, and international monetary and fiscal policy coordination

This paper considers the implications of international policy coordination when both monetary and fiscal policy choices are endogenous. We show that a movement from insular monetary commitment to international monetary policy coordination will, if fiscal policies are not coordinated, produce higher output and public expenditure levels at the expense of higher inflation rates. We also show that the concurrent coordination of monetary and fiscal policies raises output and inflation while lowering public expenditure relative to a regime of monetary coordination alone. We conclude that the arguments for concurrent monetary and fiscal policy coordination fail to have a clear-cut theoretical basis.

Labour movement organization and political intervention

Abstract. In contrast to much of the recent emphasis on micro economic reform and market oriented economic policy, there is a strong argument in favour of considering political institutional factors. In particular, these include the power of labour in systems of collective bargaining and in broader policy formulation institutions which is an essential element of successful economic policy, especially the achievement of low rates of unemployment. The research reported in this paper is aimed at developing an explanation of the ability of the organized labour movement to promote its political interests through the institutional decision making structures of modern capitalist economies. We argue that, where labour participation is formalised in these institutional arrangements, specific policy measures conducive to low unemployment will be favoured, including relatively high levels of public capital expenditure and the protection of manufacturing employment. Most comparative studies of the consequences of collective action and of political intervention in the market employ a cross‐sectional design that limits the number of cases in statistical analyses to the number of countries covered. In this paper we present the results of an analysis of comparative data on 11 OECD countries using a pooled time series regression procedure that enables us to use many more cases than is possible with the cross‐sectional design. In this way we arrive at more firmly grounded conclusions as to the efficacy of labour movement strategies in reducing unemployment.

Choosing tax rates and public expenditure levels using majority rule

A sufficient condition is presented for a policy to be a Condorcet winner when voters differ only in a single characteristic. The condition is that all voters' utility gradients with respect to the N different policy dimensions lie in the same plane in R N . If the policy is a set of commodity tax rates, then the condition is implied by the linearity of voters' (common) Engel curves. If the policy includes levels of public good provision, then the vectors of marginal willingness to pay for the various public goods of the different voters must all lie on the same line.

On optimal public good provision with tax evasion

It is proved that for public goods with zero income effects (also called Ziff public goods) tax evasion does not affect the optimal level of public expenditure. Further examples show that, in general, tax evasion may lead to less but also to more public expenditure.

Distortionary Taxes and the Provision of Public Goods

Economists have long been concerned with finding an efficient level of public expenditure. The classic statement of the problem was given by Paul Samuelson (1954). An optimal level of expenditure is where the sum of the marginal rates of substitution between the public good and a reference good equals the marginal rate of transformation between the public good and the reference good (ΣMRS = MRT). However, Samuelson's formula assumes that all of the revenue needed to finance public goods can be raised with lump-sum taxes. Since this is not generally possible, the formula must be modified to account for the distortionary effects of the tax system. An appropriate modification is to multiply the cost side of the equation by a term that is commonly called the marginal cost of public funds (MCF). In the case of Samuelson's formula, where government is entirely financed with lump-sum taxes, the MCF would be exactly 1.0. In the traditional view of economists, distortionary taxes cause the MCF to be greater than one, thus raising the cost of providing public goods. In this paper, we discuss some cases where the MCF may be less than one. We will illustrate this possibility using numerical examples for labor taxes.

Macro-policies for small-scale industry and Appropriate Technology

Macro-policies are those that concern aggregates in the economy, like the level of taxation, public expenditure, money supply, or exchange rate, while meso-policies are those that concern the distributional consequences of any given macro-policies, e.g. the sectoral distribution of public expenditure or the tax rates on different types of activity. The macro- and meso-policy environment is of critical importance in determining technology choice and technology change. Yet most efforts to promote small-scale enterprises and Appropriate Technology (AT) have been concentrated at the micro-level, in industrial estates supporting small enterprises and in projects to develop ATs. Despite a wide range of interventions, including, for example, boat-building, mini-cement plants and solar energy (see Carr (ed.), 1986), for a survey of a number of AT interventions), the effects have been confined mainly to a small number of firms and to particular areas. ATs have rarely been disseminated widely and in most countries ...

Bypassing Barnett: the comprehensive spending review and public expenditure in Wales

Under UK devolution, public expenditure is distributed to the devolved administrations by means of the population‐based Barnett formula. However, in the July 2000 Comprehensive Spending Review (CSR) the Treasury bypassed the operation of the Barnett formula to determine public expenditure levels in Wales. This was necessary in order to enable Wales to access European Objective 1 funds for economic regeneration. In so doing, the UK government has set a precedent which is destined to accelerate demands for a thorough and independent review of regional public expenditure needs.

The impact of citizen influence on local government expenditure

This paper examines the impact of three measures of direct citizen influence — the initiative, referendum, and recall — on the level of local public expenditure for a national sample of communities with 10,000 persons or more. Two types of statistical tests are performed to analyze the role of the median voter model and to measure the effect of these governmental characteristics on the level of public spending.

Monopoly power and monitoring: A test using the Gonzalez and Mehay model

In summary, the audit opinion is a control technique that behaves as expected in a GM model. An unqualified opinion seems to be an effective device that is associated with reduced levels of public expenditures. Higher spending is associated with qualified opinions. One interpretation of this result is the use of strategic bureaucratic roadblocks to limit the effectiveness of the audit.

Explaining public education expenditure in OECD nations

Abstract. This article seeks to explain cross‐sectional variation in public education expenditure levels and change since 1960. Five possible explanations are located: the incremental push of programme inertia, demographic and related pressures, economic resource growth, the impact of party and the cultural impact of Roman Catholicism. A multivariate analysis demonstrates that educational expenditure is an arena in which monocausal explanations are wholly inappropriate. With the exception of programme inertia, each of the explanations is seen to have an important bearing on this aspect of the people's welfare.

Changed climate for education managers

Politicians make conflicting claims about the level of public expenditure on education. Analysis of the figures over the longer term, however, suggests that there has been a major shift in spending patterns. Whereas in the past education seemed to enjoy favoured status as an area of high priority, spending is now more contested.

The stability of stated preferences for public goods: Evidence from recent budget games

We have investigated the stability of the individual response in recent budget games based on survey data, which is an important requirement for the reliability of this instrument. Budget games have gained popularity due to the problems encountered with alternative methods to determine preferences for public goods, such as the analysis of actual public expenditure date using median-voter theory or similar approaches. The short-term test-retest correlations (within an interval of one month) turn out to be rather low, typical around 0.3. No explanation of the test-retest differences could be found from the usual socio-economic and political characteristics of the respondents or from information characteristics of the survey design. Also, the pattern of budget-game outcomes for different countries and different periods is rather similar. The cumulative evidence suggests that the survey response to budget games is generated to a large extent by very general notions on the (un)desirability of public goods: ‘defence is bad, education and health care are good’. This implies that outcomes are often not related to the actual level and structure of public expenditure or revenues. As a result, the individual responses, even to the more sophisticated budget games, are subject to large uncertainty margins. Our results should warn researchers and, even more important, policy makers against giving too much weight to stated preferences for public expenditure or taxation levels obtained from budget games. Of course, further research is needed to obtain the precise limits of the instrument, including laboratory experimental economics.

Tax Rates, Deficits, and Intertemporal Efficiency

This article contains the derivation of a compact elasticity formula for the efficient taxation of labor income in an intertemporal setting. The question of whether or not efficient public financial policy will involve constant tax rates over time is addressed by reference to this formula under various specifications of the economic environment. A specific set of assumptions sufficient to generate tax constancy consists of (1) preferences of the isoelastic marginal utility class and (2) public debt indexation to aggregate consumption levels. In this instance, the government would find it optimal to run deficits—holding tax rates constant—when either public expenditure levels are high or when tax base levels are low.