Public Expenditure Research Articles

Effect of Budgetary Control Measures on Financial Performance of the County Government of Kajiado

The key factor for the successful implementation of budgeting is the unequivocal support from management and leadership. Without this support, the entire system is at risk of failure. It is crucial to follow up budgeting with effective control measures. The purpose of this study is to examine the effect of budgetary control measures on financial performance of the county government of Kajiado. The study’s objectives are to: - assess the effect of budget planning, evaluate the effect of budget coordination and determine the effect of budget evaluation on financial performance of the county government of Kajiado. This study is anchored on the allocation of resource theory, expenditure theory and progressive theory of public expenditures. The study used a descriptive research design. The target population of the study were the 4,017 employees in Kajiado county government in all the four departments. The study employed stratified random sampling, to categorize the population into strata. To get the number of employees per department, the study used the sample proportionate to population technique. Then, the study used simple random sampling to select the employees. The study used the Yamane (1973) formula to arrive at the sample size of 363 respondents. Data was collected through questionnaires. A pilot study took place at Kajiado County. Questionnaires were administered to the sampled employees at the county. Data was analyzed using SPSS. Findings revealed that budget planning positively and significantly influence financial performance of the county government of Kajiado (β = 0.168, p = 0.000). It was noted that budget coordination positively and significantly influences financial performance of the county government of Kajiado (β = 0.494, p = 0.000). Results indicated that budget evaluation positively and significantly influence financial performance of the county government of Kajiado (β = 0.340, p = 0.000). It was concluded that Kajiado County employs a collaborative approach to budget planning, involving employees and various departments from the outset. Teamwork and consultation among departments in the budgeting process is crucial for ensuring alignment with strategic objectives and promoting ownership and accountability among stakeholders. It is recommended that efforts should be made to ensure that the budget committee is adequately resourced and empowered to fulfill its oversight role effectively. The county government of Kajiado should consider implementing cross-functional budgeting teams comprising representatives from various departments. The county government of Kajiado should implement a comprehensive review process that not only assesses expenditure performance but also evaluates the effect of budget allocations on the county's strategic objectives and service delivery.

Fiscal Policy and Economic Growth Nexus: Evidence from Zambia

Purpose: This study examines the short-run and long-run impact of the expansionary fiscal policy on economic growth in Zambia from 1991 to 2021. Materials and Methods: The study employs the Vector Error Correction Model (VECM) and Auto Regressive Distributed Lag (ARDL) Models to examine the short-run and long-run impact of total public expenditure, total tax revenue and total public debt time series data on the gross domestic product (GDP) of Zambia from 1991 to 2021. The Keynesian theory informed our study, which presupposes that the unemployment problem might be solved by boosting government spending on consumption and that government spending was an exogenous factor that contributed to economic growth (Keynes, 1936; Singh & Sahni, 1984). Findings: Both the VECM and ARDL Models show the existence of statistically significant long-run cointegration among public expenditure, external debt, tax revenue and GDP. Specifically, VECM estimates show that for a 1% increase, Tax revenues have a positive long-run significant effect on Zambia’s economic growth of 3.36%, while external debt and public expenditure have significant negative effects on the economic growth of 1.17% and 0.003% in Zambia respectively. The ARDL model estimates indicate that, in the short run, an increase in tax revenue of 1% increases GDP growth by 1.92%, while a rise in government expenditure and external debt by 1% results in a decline in Zambia’s economic growth by 0.003% and 6.14% respectively. Implications to Theory, Practice and Policy: Given the foregoing findings, the therefore study recommends that the Government of Zambia should widen the tax base to mobilize more tax revenues and reduce the budget deficits emanating from high government expenditures. External public debt should also be reduced.

Distress financing associated with out-of-pocket expenditure for non-communicable diseases in India

ABSTRACT Objective The objective of this study is to assess the coping mechanisms used by the households who incur out-of-pocket expenditure (OOPE) due to Non-communicable Diseases (NCDs). Also, it seeks to examine the underlying factors responsible for various coping strategy. Data and Methods Data from the 75th round of the National Sample Survey Office (NSSO) has been used for the study. Descriptive statistics, concentration index (CI), and multinomial logistic regression have been employed to do the analysis. Results Households having cancer patients have a higher rate (46.80%) of distress financing, followed by cardiovascular diseases (27.43%), chronic respiratory diseases (26.91%), and diabetes (24.77%). The result of multinomial logistic regression shows that households belonging to the other caste categories, availing healthcare at private health centre, lower economic status, lack of insurance coverage, and households with casual labour are more likely to depend upon distress financing for NCDs hospitalisation. Conclusion The issue of financing inpatient care for NCDs, specifically cancer and cardiovascular diseases, is a significant concern in India. Therefore, an increase in public expenditure and investment in public health facilities is essential to increase health seeking behaviour of people by reducing OOPE, particularly among the poor and marginalised groups.

Wpływ kryzysu finansowego na dochody gmin miejskich w Polsce – doświadczenia pandemii COVID-19

The COVID-19 pandemic has given rise to grave economic consequences, especially for the public finance sector, both at the central and local government level. The aftermath of the pandemic-induced crisis began to be felt particularly by local government units (LGUs), which are responsible for the implementation of most public tasks at local level. As a consequence, the role of budget planning increases and the rationalization of public expenditure in response to declining revenues becomes important. This paper is in line with the ongoing discussion on the implications of the COVID-19-induced crisis. Two research goals were formulated. The former was to assess the effects of the crisis caused by the COVID-19 pandemic on budget revenues and indirectly on the financial standing of Polish urban municipalities, and the latter was to identify changes in the structure of urban municipalities budgets in Poland as a consequence of the pandemic. For the needs of the study, we used an indicator analysis of urban municipalities budgets, which allows for a synthetic determination of the financial condition and verification of development decisions. The aim of the research was achieved by analyzing the dynamics of indicators that characterize urban municipalities budget revenue in Poland. The scope of research covered the years 2010–2022. The results and the formulated practical recommendations constitute a complementation of the research on the effects of the COVID-19 pandemic for public finance, in particular the finances of local government units. The analyses demonstrate a shift in the urban municipalities revenue structure in Poland, which is the effect of a decreased share of own revenue, especially tax revenue, and an increase in the share of transfer revenue. This was due to three factors. Two of them were directly related to the COVID-19 pandemic, i.e 1) reduction in tax revenue (mainly from shares in PIT) as a result of the lockdown and the economic crisis; 2) options of support for local governments in the form of increasing transfer revenue. The third factor that contributed to the decline in own revenue are changes unrelated to the pandemic. These include, for example, changes in personal income tax or changes in the “Family 500+” programme.

Distributional Effects of the 2012 Pharmaceutical Co-payment Change in Spain and Simulated Proposals for Improvement

We analyse the distributional effects of the 2012 pharmaceutical co-payment reform and eleven simulated alternative schemes in the Canary Islands. A random sample of 41,962 residents covered by the Spanish National Health System together with their individual prescription information from one year before to one after the change was used. The Concentration index (CI) was used to compare inequality in private pharmaceutical spending by income levels: CI increases from 0.03 to 0.07 for the working population, being simulation number 11 the most progressive one (CI=0.20). The use of more income ranges increases progressivity of the system slightly, although more suitable models could have been used, combining more progressivity with more sustainable pharmaceutical public expenditures.

TAX CONTROL AS AN ELEMENT OF INTERACTION BETWEEN TAX PAYERS AND TAX AUTHORITIES

The article analyzes the role and importance of tax control as a key element of interaction between taxpayers and tax authorities. It is determined that tax control is a key element of the tax system, since the functioning of the country's economy depends on its effectiveness, and forms of tax control contribute to the efficiency of tax relations. The elements and methods of tax control are considered, and it is determined that it operates within the framework of strict legal regulation and has a state character. It is established that in order to increase the activity of tax control, it is necessary to resolve the issue of interaction and mutual responsibility between taxpayers and the State. This is possible through the introduction of the basic principles of taxation and the formation of a tax policy that meets budget priorities and the organization of public expenditures. The article identifies the factors that complicate the implementation of tax control. Among them are the difficult financial situation of many taxpayers, the low level of tax culture and taxpayers' distrust of the tax authorities. These problems can be overcome by improving tax legislation, strengthening the responsibility of tax officials, and by taking measures to raise awareness and educate the public about the importance of paying taxes correctly. It is analyzed that the digital transformation of tax audits leads to a significant reduction in the time required for their conduct and an increase in the likelihood of detecting tax evasion. However, this process faces a number of problems that can be solved by amending the relevant legislative acts

Being Green and Prudent: Economy-Wide and Environmental Impacts of Renewable Energy Production Subsidy in Nigeria

ABSTRACT: Green fiscal policies are becoming prominent policy instruments for achieving energy transition. However, while the effectiveness of these policies on renewable energy outcomes have been well documented, the economy-wide impacts are rarely studied. This study examines the economy-wide and environmental impacts of renewable energy production subsidy in Nigeria. The study provides a novel modeling framework for analysing fiscal and other incentives for green energy in Nigeria by incorporating self-generated electricity, which is a major component of electricity supply in Nigeria, into a macroeconomic model. The study uses a Computable General Equilibrium (CGE) model to analyse the effectiveness and economic impacts of renewable energy production subsidy in Nigeria. CGE models are commonly used to assess the economy-wide impacts of public policy. Specifically, the PEP-1-1 model, which is a static single-country model, is used for the analysis. The model is calibrated on Nigeria's updated social accounting matrix (SAM). The results of the analysis show that renewable energy production subsidy is effective in enhancing the development of the renewable-electricity sector and encouraging the use of renewable electricity but does not significantly reduce the use of conventional electricity sources. The subsidy, if financed by public deficit, has positive impacts on real economic outcomes such as GDP, household income, welfare, and employment, but has a smaller effect on CO2 emissions. In contrast, the economic effects are mostly negative, but the CO2 emissions-reduction effects are larger if the subsidy is financed by reallocation of public expenditure. In addition, the effects on sectoral outputs are mixed. The results of this study can be used by policy makers to ascertain how to finance green subsidies in fiscally constrained and energy-poor developing countries. Specifically, policy makers should take cognizance of economic and feedback effects when designing and implementing environmental policies. Beyond Nigeria and the specific case of fiscal subsidies, the modeling framework presented in this study can be applied to other green energy policies and can be adapted to other developing countries.

What is the best set of indices/indicators for evaluating “health promotion governance” in health systems? A proposed methodology for health promotion decision-making

ABSTRACT We aimed to identify the indices/indicators needed for assessing health promotion governance in health systems. Data were obtained from a literature review, a modified Delphi process, and an Analytic Hierarchy Process (AHP). The study was conducted from May 2021 to January 2022 using a multi-method design comprised of four sequential stages: (1) a comprehensive literature review for identifying the health promotion indices/indicators originating from the Ottawa Charter’s action areas; (2) a 3-round Delphi survey to identify, by consensus, which of those indices/indicators would be relevant to the health promotion governance in the health system;(3) Analytic Hierarchy Process technique (AHP) to prioritize the selected indices/indicators; (4) presenting the results of AHP to a group of the health promotion specialists of the selected experts to selecting other indices/indicators if necessary. Health literacy was considered the most important index to assess health promotion governance from experts’ perspectives. The per capita public health expenditure was supposed to be the second most important indicator. The indices ranked third and fourth in priority were the health equality and urban health indexes, respectively. The health promotion specialists selected three other indices: the number of policies changed due to advocacy, social capital, and positive health. Based on the results, a series of essential indices/indicators have been proposed depending on the study’s purpose, which can help health system policymakers and managers to assess the health promotion governance in the health system.

Exploring Wagner's Law in India: An Empirical Study of Economic Growth and Public Expenditure

In this research paper, we test the connections between public spending and economic growth in India by employing annual data from 1981-82 till 2019-20. We examine if there is a long-run relation between public spending and economic growth and then we try to understand the direction of causality between them by using six versions of Wagner's law along with an augmented version. The paper employs tests of stationarity, cointegration, granger causality and the vector error correction model for the analysis in all the versions. Results from these tests show that only some versions give support to validate Wagners' law in India over the sample period studied.

Convergence of Health Expenditure and Health Outcomes in Central Europe and the Baltic Region

ABSTRACT This research work examines the convergence of health expenditure in Central Europe and the Baltic region. The study reveals the absolute convergence in per capita health expenditures, indicating similar health outcomes for all eleven countries of the region. However, there is a divergence in health expenditure and outcomes across the eleven countries. Notably, public health expenditure diverges in Denmark, Estonia, Finland, and Norway, while, private health expenditure converges in Poland, Russia, and Sweden. Despite an overall convergence in life expectancy at birth across the countries, mortality rates due to non-communicable diseases only converge in Estonia.

Fiscal Prudence and Economic Growth in Asia: the role of Efficient Public Spending

The present research is an attempt to study the role of public sector efficiencies in determining optimal fiscal size of the governments for selected Asian countries. Studying efficiency of public spending is important because efficient government spending leads to improved provision of public services like health, education, infrastructure, and welfare initiatives. Improving public sector efficiency will help to promote transparency and accountability which reduces the chances of corruption and wastage of scarce public resources. Using the panel data for 19 developing countries for years 1996-2022, efficiency augmented optimal size of government expenditures is calculated. Pooled Mean Group technique is employed to calculate the impact of efficiency on growth maximizing levels of government total spending, government consumption spending and government investment spending. Results establish strong impact of efficiency in public expenditures on optimal fiscal size. Other variables enhancing economic growth include capital stock and trade openness, while human capital has negative effects. Public sector efficiencies are found to reduce growth maximizing size of government spending. The optimal size of government total expenditure is estimated to be 25.19 %, while optimal fiscal size for government consumption expenditure and government investment expenditure are 14.04%, and 11.18 % respectively for developing Asian countries.

Self‐love, growth, and competition in a public good game

AbstractCompetition and cooperation are not always at odds and contributions to public goods are almost never one‐off one‐shot temporally isolated events. We examine voluntary contribution in a new public good experiment where “self‐love” competitive motivations and time dynamic interdependencies are simultaneously considered. The competitive motivations are manipulated via subjects competing in each group (intragroup competition) for higher return factors on their public expenditure, whereas time dynamic interdependencies are modeled by letting returns from previous periods available for future contributions to public goods (CG). We ran two control conditions where intragroup competition (C) and time dynamic interdependencies (G) are separately implemented. Our findings showed that shares of endowment contributed were significantly greater and increasing over time when endowments growth and heterogeneous returns factors were simultaneously introduced. This effect can be attributed to return factors obtained in previous periods. Accordingly, wealth exponential growth has been greatly accelerated relative to our control condition. Distributive equity concerns have been also documented. Although Gini coefficients were significantly lower in the presence of heterogeneous return factors and endowments growth, inequality trends seemed to converge at control condition values in the long term.

The role of financial innovation in carbon intensity reduction: perspectives from energy structure transition and fiscal policies.

Carbon emissions are important factors causing global warming, which requires global efforts to deal with. In this paper, we investigate the mechanism of financial innovation on reducing carbon emissions in China by constructing a financial innovation development index with factors of green finance as well as fintech development. Empirical results show that financial innovation contributes to reduce carbon intensity by promoting energy structure transition as well as public fiscal expenditure on energy conservation and environmental protection. Moreover, heterogeneity exists in the effect of financial innovation on carbon emission reduction. Financial innovation has a significant role in reducing carbon intensity in eastern regions, but has a relatively small influence on central and western regions. Furthermore, financial innovation has a lag effect on reducing carbon intensity.

Exploring minimal indirect digital economy taxation as a post-COVID-19 economic recovery strategy for African revenue mobilisation

The COVID-19 pandemic and its aftermath continue to devastate most areas of society and continue to reveal inherent structural vulnerabilities in the economies, social, and health systems in countries. In addition, the Russia-Ukraine conflict of 2022 and the geopolitics of its resolution continue to create shocks across the globe- evidenced by rising inflation, increased sovereign debt level, recession, and reduced public expenditure among others. While many sectors of the economy were crippled by the back-to-back global economic shocks of the Covid-19 pandemic and the Russia-Ukraine conflict through reduced economic activities resulting in a global recession and reduced tax revenues for public expenditure, the digital economy has surprisingly boomed and continues to grow in this period of uncertainty. This has been directly attributed to the 'lure of the alternative', caused by the social and economic lockdowns imposed by countries, which pushed many persons and companies to explore the next available option- online platforms to conduct business. Although the rise in the use of digital platforms for business activities is commendable, this development has some implications for traditional business frameworks which in turn affects revenue mobilisation for funding public infrastructure projects and services. This is because, in Africa, the digital economy is not as well-regulated as the traditional economy. This creates an avenue for tax evasion and avoidance, arising from the dynamic and complex nature of digital transactions. This challenge requires that urgent solutions be found for the effective taxation of the digital economy. There will be a need to review/reform economic and fiscal policies and laws to ensure a faster recovery from the economic effects of the COVID-19 pandemic. There would also be a need to create digital tax policies that are equitable for source and market jurisdictions and, lastly, there will be a need for cooperation in tax law and policies across Africa that capture the reality of the growth and ubiquitous presence of digital multinationals in Africa.

Heterogenous Panel Modeling on Foreign Direct Investments in E7 Countries

With the spread of free economy conditions, the increase in the international mobility of capital has led to an increase in the number of economies that want to attract capital and the opportunities it will provide. In addition to this, capital owners have started to use free movement opportunities in order to maximize their own benefits. In this context, the factors affecting foreign direct investments including long-term capital flows have been the subject of many empirical studies. In this study which is carried out within the scope of the annual data of E7 economies for the period of 1992-2021, it is aimed to reveal the relationships between net foreign direct investment inflows and unemployment, liberal democracy, public expenditures, foreign direct investment outflows and short-term borrowing. In the study, in which the heterogeneous panel data method based on seemingly unrelated regression analysis was used, it was determined that the realizations under the influence of the selected independent variables differed by countries, but it was found that all the variables included in the analysis had a decisive role on foreign direct investment inflows.

Population ageing and public finance burden of dementia: Micro-simulations evaluating risk factors, treatments and comorbidities in Luxembourg

This paper uses long-term population projections to study the evolution of dementia in Luxembourg through 2070, as well as its impact on public expenditure through healthcare and long-term care. We extend a standard micro-simulation model on health outcomes by adding an algorithm to identify individuals suffering from dementia. This allows us to simulate dementia prevalence among individuals aged 50 and more in several scenarios incorporating alternative hypotheses about risk factors, new treatments and comorbidities (including long-run effects of COVID-19). Public health policies reducing stroke and hypertension risk could lower dementia prevalence by 17% and public expenditure on healthcare for dementia patients by a similar amount. A new treatment extending the mild dementia phase could nearly double prevalence and possibly triple the associated healthcare costs. Finally, past exposure to COVID-19 could raise prevalence by 12% to 24% in the medium term and public expenditure on dementia healthcare by 6% to 12%. Public expenditure on long-term care for dementia patients would increase even more, generally doubling by 2070.

A microfounded approach to currency substitution and government policy

This paper develops a search-theoretic, two-country, dual-currency model featuring endogenous currency substitution with costly authentication of foreign currency. Benevolent governments, unable to commit to future policies, determine fiscal and monetary policy weighing distortion-smoothing and time-consistency. Decisions of the fiscal authority are accommodated by the monetary authority, where public expenditures, public debt, labor taxation, and inflation are determined using the notion of a Markov-perfect equilibrium. Inflation differentials arise endogenously from cross-country heterogeneities in the citizens' valuation of public goods, rendering international differences in fiscal imbalances the root cause for currency substitution. A steady-state analysis characterizes long-run allocations and identifies the domestic and foreign governments' best responses to changes in local payment patterns. Historical data supports the theoretical findings and provides empirical evidence for the positive relationship between currency-substitution ratios, inflation, and public debt. An extension studying de jure dollarization shows that time-consistency concerns disappear once currency substitution is imposed exogenously, reducing the government's objective to distortion-smoothing exclusively.

Cost-effectiveness of village health worker-led integrated community case management (iCCM) versus health facility based management for childhood illnesses in rural southwestern Uganda

BackgroundIn Uganda, village health workers (VHWs) manage childhood illness under the integrated community case management (iCCM) strategy. Care is provided for malaria, pneumonia, and diarrhoea in a community setting. Currently, there is limited evidence on the cost-effectiveness of iCCM in comparison to health facility-based management for childhood illnesses. This study examined the cost-effectiveness of the management of childhood illness using the VHW-led iCCM against health facility-based services in rural south-western Uganda.MethodsData on the costs and effectiveness of VHW-led iCCM versus health facility-based services for the management of childhood illness was collected in one sub-county in rural southwestern Uganda. Costing was performed using the ingredients approach. Effectiveness was measured as the number of under-five children appropriately treated. The Incremental Cost-Effectiveness Ratio (ICER) was calculated from the provider perspective.ResultsBased on the decision model for this study, the cost for 100 children treated was US$628.27 under the VHW led iCCM and US$87.19 for the health facility based services, while the effectiveness was 77 and 71 children treated for VHW led iCCM and health facility-based services, respectively. An ICER of US$6.67 per under five-year child treated appropriately for malaria, pneumonia and diarrhoea was derived for the provider perspective.ConclusionThe health facility based services are less costly when compared to the VHW led iCCM per child treated appropriately. The VHW led iCCM was however more effective with regard to the number of children treated appropriately for malaria, pneumonia and diarrhoea. Considering the public health expenditure per capita for Uganda as the willingness to pay threshold, VHW led iCCM is a cost-effective strategy. VHW led iCCM should, therefore, be enhanced and sustained as an option to complement the health facility-based services for treatment of childhood illness in rural contexts.

Distribution and use of tax support for housing in the Czech Republic

AbstractThis article focuses on mortgage interest deduction (MID) as an indirect tax support for acquiring one's housing. This form of support is the most widely used in the Czech Republic compared to other tax reliefs and causes the highest losses for the government budget. This paper provides quantitative evidence on how the MID was distributed among taxpayers in the Czech Republic in the period 2008–2019 in relation to taxable income and revenue losses for the government budget. Furthermore, it assesses the effectiveness of these tax measures in reducing socioeconomic inequalities among taxpayers. Research based on the application of the MID in tax returns has shown the effective distribution of the MID until 2017. Tax support for housing was used mainly by taxpayers with low taxable income, which is also the largest group. The essence of vertical equity has been fulfilled, which contributed to reducing the level of social inequality. This positive distributional effect has diminished over time. As of 2019, the highest share of public expenditure was redistributed to taxpayers with higher taxable income, indicating the existence of inequalities in the tax system. The different developments over time have shown that the use of the mortgage interest deduction cannot be assessed statically, as it evolves dynamically over time.

The principle of segregation: an analysis from the perspective of Weber's ideal type and Habermas' Theory of Communicative Action

This article seeks, through concepts and standards, and using ongoing research, to investigate the principle of segregation of functions and its application in the control of public expenditure from the perspective of Weber's ideal type and Habermas' theory of communicative action. . Through documentary and bibliographical research, it was possible to partially conclude that civil servants, teams or sectors should not perform functions in different phases of public expenditure, including and especially in phases that involve judgment and inspection; the principle of segregation of functions is also based on Weber's bureaucratic ideal type, in the sense that the specialization and expertise of the civil servant tends to increase the degree of precision and excellence of the activities carried out by him; This principle also finds support in Habermas' theory of communicative action.