Composition Of Public Expenditure Research Articles

Public Spending Composition and its Implications for Economic Growth and Poverty Reduction in Pakistan: A Dynamic Time Series Analysis

This study explores the dynamics of government spending composition in Pakistan, focusing on its impact on economic growth and poverty reduction. The study analyzes subcategories of public expenditures, including current and capital spending, and functional classifications such as education, health, physical infrastructure, and defence. Using the ARDL framework, the study finds a long-run relationship between public spending and economic growth, with capital spending positively impacting GDP growth while current expenditures have a negative effect. Education and physical infrastructure expenditures contribute positively to economic growth, while health expenditures negatively impact the long run. The study also disaggregates health and education expenditures to analyze their economic impacts. Expenditures on research and curriculum development in education and subsidiary transportation services positively affect economic growth. However, primary and secondary education expenses and tertiary education expenditures do not show a significant growth impact. Similarly, expenditures on hospital services, patient health services, and research and development in health do not contribute to economic growth. The study concludes that the composition of public expenditures is related to poverty reduction, with total government spending and investments in education, health, and physical infrastructure playing a significant role in poverty reduction.

Inflation targeting and the composition of public expenditure: Evidence from developing countries

An important literature shows that inflation targeting (IT) adoption improves fiscal discipline. Our impact assessment analysis performed in a large sample of 89 developing countries over three decades shows that this favorable impact covers a composition effect: IT adoption is found to reduce more current expenditure compared with public investment in IT countries relative to non-IT countries. This finding is robust to various alternative specification, related to the structure of the sample, the measurement of the IT regime, or the estimation method. Consequently, aside from its acknowledged benefits for monetary policy goals, IT appears as an efficient tool to strengthen fiscal policy in developing countries towards lower and more productive public expenditure.

Public expenditure and human development in Brazilian municipalities

Purpose: This study examines the relationship between the structure of public expenditure composition in Brazilian municipalities governments and the local human development in the period from 2005 to 2016.
 Methodology: Hypothesis testing was used to analyze the relationship between public spending in municipalities, which were categorized according to their spending indexes (SI), and the Índice Firjan de Desenvolvimento Municipal (Firjan Municipal Development Index; IFDM), a proxy for human development, based on the concept proposed by Sen (1999). Therefore, data from all 5,570 Brazilian municipalities were used, treated in an aggregated form using Data Panel analysis and Quantile Regression to more comprehensively address the heterogeneity of Brazilian municipalities.
 Results: The results make possible to infer that the changes in the public expenditure composition did not produce a striking improvement to the population’s well-being. It is evident that despite the maintenance of social policies due to strong regulation by the central government, spending, although increasing in these areas, has not been producing the desired effects in improving the population's well-being indicators.
 Contributions of the Study: This research contributes to academia and society, as it shows that for Brazilian municipalities to make effective strides toward growing and toward sustainable human development indicators in a more incisive way, the hegemonization of the public expenditure policy requires adjustments. These adjustments could consider the idiosyncratic conditions of the different stages of human development in the subnational units.

Women and local public finance

Does the gender of the mayor affect the size and composition of public expenditures and revenues? Using a sharp regression discontinuity design in close mixed gender races for the election of mayors in Italian municipalities in the period 2000–2015, we find no significant differences in policies implemented by male and female mayors. We explore whether the result masks heterogeneity by gender composition of the local government and by electoral rules according to which a mayor is elected. We find some evidence that female mayors devote a larger share of spending to the environment when there are more women in the municipal council, whereas they reduce the amount of resources going to social spending under the run-off relative to the single round system.

Corruption and distortion of public expenditures: evidence from Africa

This study investigates the effect of corruption on the trade-off between capital and current expenditures in a panel of 48 African countries over the period 2000–2016. Based on statistical yearbooks, we compile disaggregated data on public finances for African countries and find that a high prevalence of corruption distorts the composition of public expenditures at the expense of the share of capital expenditure. Specifically, an increase in corruption by one standard deviation is associated with a decrease in the proportion of capital expenditure from 29 to 18%. The results are robust to various specifications and estimation methods, including the fixed effects and instrumental variables approach. The supportive argument demonstrates that it seems more beneficial for corrupted bureaucrats to manipulate public spending in favor of current rather than capital expenditures. The latter relies on formal and traceable procedures, whereas current expenditure is known to be more open to the use of discretionary allocation.

Public expenditure composition and fiscal decentralization in Brazilian local governments: an analysis through unconditional quantile regression with longitudinal data

Abstract This paper investigates the effect of increasing fiscal decentralization on the composition of public expenditures of Brazilian local governments. The research is innovative, demonstrating that the heterogeneity of expenditure scale influences the correlation between fiscal decentralization and public expenditure of local governments. The sample consisted of unbalanced panel data of 5,565 municipalities for 17 years from 2000 to 2016. The analysis used unconditional quantile regression with panel data. The main findings were: (i) fiscal decentralization affects public expenditure in Brazilian local governments. However, this effect depends on local expenditure scale and fiscal decentralization strategy. For example, the median coefficient was negative in personnel expenditures, and the effect was positive for the third quartile of local governments, when fiscal decentralization was measured by the tax revenue over total revenue. On the other hand, the effects were also positive for median and third quartile regarding intergovernmental transfers per capita like proxy of fiscal decentralization; (ii) the measures (proxies) of fiscal decentralization are correlated with the composition of public expenditure; (iii) in median terms, fiscal decentralization has greater effects on investment expenditures than on current and personnel expenditures; and (iv) in median terms, the tax revenue participation promotes an increase in administrative and planning expenditures instead of expenditures in social functions. Fiscal decentralization measured by intergovernmental transfer per capita has more positive effects on social functions than on legislative and administrative functions.

Public Capital and Fiscal Constraint in Sovereign Debt Crises

Sovereigns' public and constraint influence sovereign debt crises and resolution. We compile a dataset on public expenditure composition around restructurings with private external creditors. We show that during restructurings, public investment (i) experiences severe decline and slow recovery, (ii) differs from public consumption and transfers, and (iii) relates with restructuring We develop a theoretical model of defaultable debt that embeds endogenous public accumulation, expenditure composition, production and multi-round debt renegotiations. The model quantitatively shows public investment dynamics and tight constraint delay debt settlement, i.e., capital accumulation delays and fiscal delays. Data support these theoretical predictions.

Delegation and Decentralization: Reform Ideas for Bihar’s Economic Transformation

This article proposes reform ideas for Bihar using advances in economics research on the role of institutions in economic development. Institutions—the formal and informal rules of the ‘game’ of how people interact in society—are fundamental determinants of economic activity and entrepreneurship. Historical institutions of caste-based feudalism in Bihar have been regarded as depressing entrepreneurship and encouraging lawlessness and corruption. New survey data–based evidence shows the potential of two reforms to bring about Bihar’s institutional and economic transformation: greater delegation of public policy implementation in bureaucracies and greater decentralization of public policy selection to local governments. Greater delegation means giving autonomy and discretion to agents in bureaucracies, and promoting professional norms for service delivery rather than hierarchical monitoring and disciplining to achieve performance. Greater decentralization means that more policy choices—such as on the composition of public expenditures, tariffs and fees for public infrastructure—are made by local leaders who gain the power to make these choices by winning more local elections. Communication within bureaucracies and through local media about the performance of public policies is part of these institutional reforms. Taken together, these can reduce the influence of patronage politics and enable the selection of leaders who pursue policies in the broad public interest. In turn, these institutional changes can spur greater economic activity and entrepreneurship, including all social groups in growth and prosperity.

Economic growth and income distribution implications of public spending and tax decisions

AbstractBoth the level and composition of public expenditures and revenues have implications for economic development, as argued by the ‘fiscal multiplier’ and the ‘quality of public finance’ literature. Public finance decisions also influence the distribution of income. By reviewing the literature, I argue for a fair distribution of income as reflected in low income inequality, not particularly because of the impact of income inequality on long-term growth (which is a controversial issue), but primarily because income inequality typically implies inequality of opportunity. European Union countries have very diverse public finance structures and different levels of effectiveness, and there is room for improvement in growth and equality impacts in all countries. A general guideline would be that the most effective approach comprises progressive taxes and inheritance taxes, spending on education, health and public infrastructure, and better government effectiveness. At the height of the 2008 global and the subsequent European financial and economic crises, the fiscal consolidation strategies of EU countries largely relied on cutting public investment and social spending (except pensions), which is the opposite of what is suggested in the literature. Better fiscal rules and good fiscal institutions are needed to safeguard growth- and distribution friendly expenditures in a crisis.

THE IMPACTS OF CORRUPTION ON BUDGET BALANCE AND PUBLIC DEBT IN TURKEY: AN EMPIRICAL ANALYSIS

Today, maintaining stability, transparency and budget balance are main indicators for developed and emerging countries. Corruption, causing deviation from these indicators and its results are important issues that should be researched. Because, corruption changes the composition of public expenditures leading to inefficient expenditures, as well as dissolving public revenues and affecting budget balance negatively. Increase in budget deficit causes an increase in public debt stock. In this study, the effect of corruption in Turkey on budget balance and public debt is analyzed by using Johansen cointegration, VAR (Vector Autoregressive Model) and Granger Causality methods for 1995-2019 years. Empirical findings state that there is not cointegration relationship among variables and there are causalities from budget deficits and public debt burden to corruption and from budget deficit to public debt. VAR method provides evidence that budget deficit and corruption affect each other.

Composition of public expenditure and growth of per capita income in Indian states: a political perspective

This paper has analysed the composition of public expenditure and its impact on per capita income in major states of India. The study finds that the share of revenue expenditure in total spending of the government has increased in all the states although its effect on growth is negative. The share of capital expenditure, government spending on infrastructure, agricultural productivity, gross capital formation and share of service sector in net state domestic product have significant positive impact on per capita income. The paper has explained the political economy of public expenditure and contributed to the literature by using theoretical framework in growth process and incorporating other factors as control variables in panel regression. It has tried to explain why the government spends more on the unproductive or less productive heads in the revenue account at the cost of long-run growth. This paper argues that the government in a democratic set-up allocates a greater share of funds to distributive purposes to strengthen its support base. The results of panel regression show that if the government remains in power for a long period, the share of revenue expenditure will be higher in total spending. The effect of coalition government is, however, uncertain.

Sovereign Debt Overhang, Expenditure Composition and Debt Restructurings

Sovereigns' public capital influences sovereign debt crises and resolution. We compile a dataset on public expenditure composition around restructurings with private external creditors. We show that during restructurings, public investment (i) experiences severe decline and slow recovery, (ii) differs from public consumption and transfers, (iii) reduces share in public expenditure, and (iv) relates with restructuring delays. We develop a theoretical model of defaultable debt that embeds endogenous public capital accumulation, expenditure composition, production and multi-round debt renegotiations. The model quantitatively shows severe decline and slow recovery in public investment – “sovereign debt overhang” – delay debt settlement. Data support these theoretical predictions.

Does Composition of Public Expenditure Matter for Economic Growth? Lessons from Sri Lanka

In the context of surging public expenditure and crumbling output growth, the growth effects of public expenditure have provoked an extensive discussion in the economic and political arenas in Sri Lanka. Since 1977, both public expenditure and its composition have changed intensely and largely been accompanied by expansion in size of successive governments. Although it is difficult to determine whether Sri Lanka has reached its optimal size of public expenditure, understanding the growth effects of public expenditure would clearly link policy contributions made by public expenditure in spurring growth in Sri Lanka. The purpose of this study is to examine the growth effects of composition of public expenditure considering full implications of government budget constraints. This study considers public expenditure at a disaggregated level to isolate productive elements of public expenditure from the total. Accordingly, public expenditure on education, health, defence, agriculture and transport and communication are considered. These expenditure items are selected based on their share in total expenditure. This study found that the growth effects of public expenditure vary at disaggregated levels. A major finding showed that public expenditure in education, agriculture, transport and communication sectors is positively and significantly associated with economic growth while defence and health expenditure do not have any significant impact on growth. Given the high magnitude of positive and significant growth effects of public expenditure in the education sector, this study suggests reforming public expenditure in favour of human capital development is paramount to stimulate long-term growth in Sri Lanka.

Economic growth target, distortion of public expenditure and business cycle in China

In this study, we provide empirical evidence on the incentive role of official promotion from the perspective of managing economic growth targets. Using a manual dataset of economic growth targets in 230 Chinese cities during 2003–2016, we find that economic growth targets of governments curb public service expenditure on education, science and technology and this distortion results in the stagnation of human capital and technological progress, constraining long-term economic growth. When the growth target size of cities exceeds that of higher-level governments or if governments overfulfill their growth target tasks, then public service expenditure will decrease. We interpret the empirical findings as evidence that promotion evaluation based on economic performance distorts the composition of public expenditure, hinders sustainable economic development, and even accelerates the start of an economic downturn. Our study adds significant evidence to the theoretical literature emphasizing that the official evaluation system and public service could affect business cycle.

DOSTOSOWANIA FISKALNE A ZARZĄDZANIE FINANSAMI PUBLICZNYMI W STREFIE EURO

This article focuses on the effects of corrections to the budgetary policy in eurozone economies. The goal is to check whether advancement in implementing modern tools of public management is helpful in the time of fiscal adjustment. The authors assume that the most important role of a performance approach in conducting fiscal policy is the ability of government to implement an active budgetary policy meant as structural changes in the composition of public expenditures. In the case of the need to cut general levels of public spending, public sector managers should be able to conduct fiscal adjustment in such a way as to minimize negative outcomes of spending correction on society. The most important finding of the research is that performance budgeting (PB) has a very limited usefulness in a time of fiscal adjustment meant as a reduction in public spending. There is no statistical evidence that countries more advanced in the utilization of PB tools conduct more active fiscal policy; the dominating approach is cutting all expenditures by a given percentage rather than looking at priorities and social outcomes.

A politico-economic model of public expenditure and income taxation

This paper contributes to the literature on majority voting over fiscal policies. We depart from the standard model in two dimensions. First, besides redistributing income, the government uses the net tax revenue to finance the provision of goods and services that become in-kind transfers to the citizens. By deciding on the composition of this expenditure (education, health, law-and-order, etc.), the government chooses the allocation of the benefits to the different income segments. This choice is a fundamental ingredient of fiscal policy. Second, we tackle the problem of choosing the income tax function and the composition of public expenditure by assuming that the political process selects one of these issues as the salient one. Political controversy and vote focus on this issue exclusively. The other dimension is determined in a way so as to minimize objections (obtain consensus) among the voters. We analyze the case where the salient policy is the composition of public expenditure. We show that for each voted expenditure policy, there is a unique income tax function that attains consensus. The political process we model yields that the progressiveness of the income tax schedule depends on income inequality interacted with the elasticity of substitution of the goods provided in the market and those publicly provided. This relationship is confirmed in our empirical test.

Welfare Rigidity, the Composition of Public Expenditure and the Welfare Trap

Welfare expenditure is characterized by rigidity, i.e., it goes up easily but is very hard to get down. We introduced welfare rigidity into an endogenous growth model that includes government expenditure to analyze the impact of welfare rigidity and the composition of public expenditure on economic growth and family utility. Our findings show that welfare spending and economic growth have a non-monotonic relationship that is negative or inverted U-shaped depending on cross-country differences. Higher welfare rigidity reduces long-term economic growth and household utility. According to the estimated optimal size of welfare expenditure, China, as a developing country with a large population, has to do all it can to improve people’s livelihood but must at the same time weigh its limited resources so that its welfare expenditure does not fall into a “welfare trap.”

Consequences of Fiscal Adjustment and Public Finance Management. The Costs of Limiting the Fiscal Imbalance in Eurozone Countries

Abstract This article focuses on the effects of corrections to the budgetary policy in eurozone economies. The goal of the text is to check if advancement in implementing modern tools of public management is helpful in the time of fiscal adjustment. We assume that the most important role of a performance approach in conducting fiscal policy is the ability of government to implement active policy meant as structural changes in the composition of public expenditures. In the case of the need to cut general levels of public spending, public sector managers who have knowledge of performance effects of public policies should be able to conduct fiscal adjustment in such a way as to minimise negative outcomes of spending correction on society. The structure of the text is as follows. First, we present some insights on the economic effects of fiscal adjustment. Then, we discuss the concept of performance management presented in the theory and policy agendas of international institutions such as the European Union or the OECD (Organization for Economic Cooperation and Development). Finally, we present the result of an empirical exercise that is designed to combine the level of advancement in implementing performance budgeting (PB) and the social cost of fiscal adjustment in eurozone economies. The most important finding of the research is that PB tools seem to have very limited usefulness in a time of fiscal adjustment. There is no statistical evidence that countries advanced in utilisation of PB tools conduct more active fiscal policy – approach of cutting all expenditures across the border by given percentage rather than looking at priorities and social outcomes of fiscal adjustment dominates in all cases.

Mandatos Eleitorais e Ciclos Político-Orçamentários: Evidências dos Estados Brasileiros

A literatura sobre ciclos político-orçamentários aponta que os gestores aptos a concorrer à reeleição possuem maiores incentivos para manipular gastos públicos em períodos eleitorais. Nesse sentido, o objetivo da pesquisa consistiu em averiguar a influência do mandato eleitoral sobre os gastos públicos dos governos estaduais brasileiros. A amostra foi composta pelos 26 estados brasileiros no período de 2003 a 2014, compreendendo três ciclos eleitorais. Utilizou-se como metodologia a técnica de regressão com dados em painel. A pesquisa concluiu que o comportamento oportunista é restrito aos governadores que estão em primeiro mandato e a manipulação é restrita aos investimentos. Percebeu-se uma alteração na composição dos gastos públicos em direção aos investimentos nos períodos eleitorais nos estados cujos governadores estão em primeiro mandato. Essa pesquisa contribuiu com a literatura nacional ao identificar o mandato eleitoral como um fator capaz de influenciar os gastos públicos estaduais nos períodos eleitorais.

How Does Governance Modify the Relationship between Public Finance and Economic Growth: A Global Analysis

How Does Governance Modify the Relationship between Public Finance and Economic Growth: A Global Analysis