Composition Of Public Spending Research Articles

Fiscal Policy from a Structural Economic Dynamics Approach with General Macroeconomica Constraint

The aim of this paper is to analyze how fiscal policy can affect per capita economic growth. Therefore, an extension of the model by Araujo and Lima (2007) was made, by considering the public sector taxation and public expenses. Our findings corroborate the fact that positive public savings relieve the external constraint. We demonstrate that sectoral public spending growth rate and sectoral public taxes growth rate can affects economic growth. Still, it shows that the rate of economic growth is sensitive to the sectoral composition of public spending and taxation. Finally, a computer simulation is presented.

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.

Remittances and the Size and Composition of Government Spending

Objective. We study the effect of remittances on the size and composition of public spending. Methodology. An optimization technique is used to develop a dynamic theoretical model and a simulation analysis. Results. It is demonstrated that remittances have a positive income effect on public goods, but a negative income effect and a price effect on social transfers, which explains why public goods increase, but social transfers can increase or fall due to changes in the remittances. Recommendations. The model makes recommendations for public policy design by characterizing the optimal level of public spending. Limitations. It is desirable to extend our analysis to consider electoral incentives and thus provide different explanations of how remittances might affect public spending. Originality. To the best of our knowledge, this is the first document that develops a theory to explain the effect of remittances on the size and composition of public spending. Conclusions. Remittances have a differentiated effect on public goods and social transfers depending on the income and price effects that affect the composition of public spending.

The impact of corruption on investment and financing in the European Union: new insights

Corruption is a phenomenon that is not just restricted to less developed nations, but also touches developed countries like those in the European Union, often seen as one of the least corrupt economic areas in the world. Corruption practices and perceptions can seriously hinder economic growth and innovation, This can be due to lower access to corporate funding, greater cost of capital, its effects on competition, misallocation of resources, and distortions in the composition of public spending and the effectiveness of government policies. This paper first provides a short discussion and an overview of some academic literature on the link between corruption, financing decisions and economic growth. It then summarizes the findings of the five papers in this special issue on the topic of Corruption in a European context, discusses some insights from their results and finally points out at some avenues for future research in related topics.

The composition of public spending and the inflationary effects of fiscal policy shocks

The paper uses structural proxy-vector autoregressions to separately identify shocks to US government investment and government consumption expenditures. Positive public investment shocks robustly raise inflation and have a weak and insignificant impact on labor productivity. In contrast, positive public consumption shocks induce a significant fall in inflation together with a strong and persistent increase in hourly productivity. The empirical findings are consistent with a model where demand shocks have an endogenous effect on productivity due to variable technology utilization. Increases in government investment, despite adding to a productive public capital stock, induce a relatively low endogenous increase in productivity and goods supply in the short run and thus are inflationary, whereas government consumption shocks can lead to a temporary productivity increase and inflation decrease if technology utilization is relatively inexpensive to vary.

Fiscal impacts of electoral abstention: a study on the electorate biometric update in Brazilian municipalities

ABSTRACT Because electoral abstention may generate a difference between the preferences of general voters, i.e., those who are eligible to vote, and the preferences of effective voters, i.e., those who do vote, policies adopted by incumbents may differ according to differences in turnout rates across the electorate. The Brazilian biometric electorate update offers an innovative opportunity to explore exogenous variations in abstention rates, allowing us to verify its impact on public policies, especially local public expenditures. By combining propensity score matching, differences-in-differences and instrumental variables models, we find that the electorate biometric update decreased abstention rates in local elections in Brazil, which, in turn, changed local public spending composition towards expenditures on education. The remaining categories of public expenditures explored in this study, however, seem not to be affected by the change in the electorate composition.

Do Subnational Fiscal Rules Reduce Public Investment? The Case of Fiscal Responsibility Laws in India

This article examines whether the adoption of deficit targets by subnational governments in India influenced the composition of public spending. Using dynamic panel estimations, this study finds that the adoption of fiscal responsibility laws (FRLs) by Indian states is correlated with improvements in their budget balances, but the same period also witnessed significant cuts in development spending. Furthermore, the states have reduced their capital expenditure and social sector spending after adopting FRLs, while the increases in tax and nontax revenues are insignificant. The subnational governments in developing countries that are adopting numerical deficit and debt targets should explore mechanisms to minimize the distortionary impacts of fiscal targets on the composition of subnational spending since reduced expenditure on development and capital projects may be counterproductive for fiscal sustainability in the long run as these expenditures tend to have significant positive externalities.

Public spending, monetary policy and macroeconomic instability

AbstractWe analyze sunspot‐driven fluctuations in a standard neoclassical growth model with money holdings and public spending. In our economy, money is needed for transaction purpose, while public spending is financed through a flat income tax. Public spending includes an incompressible component and a variable part, and the latter exerts positive externalities on private utility or production. Our theoretical results show that the composition of public spending and externalities have important effects on local stability properties. First, in the absence of externalities, there is a unique steady state, and local indeterminacy depends on the interplay between the share of the cash‐in‐advance constraint and the intertemporal elasticity of substitution of consumption. Second, in the presence of externalities, multiple equilibria might emerge under weak enough production externality, while uniqueness of the steady state prevails under strong production or under consumption externality. We further show that weak production/consumption externality or strong consumption externality could generate local (in)determinacy of the steady state depending on the share of the cash‐in‐advance constraint while strong production externality generates local determinacy of the steady state. Finally, based on numerical examples, we show that an increase in the variable public spending and the income tax rate exert a local stabilizing effect while externalities promote locally the likelihood of local indeterminacy.

No Common Ground? Public Knowledge about Welfare Spending in Turkey and its Social Divisions

Social policy research examining citizens’ welfare knowledge, which offers a gateway to their understanding of the policy context, has remained limited. Adapting the opportunity–motivation–ability framework borrowed from the literature on political knowledge to welfare knowledge, this article offers an analysis of new data from a nationwide survey to explore Turkish society’s knowledge of the composition of public social spending. Corroborating earlier findings in the literature, the article maintains that most people in Turkey overestimate the relative size of social assistance spending for the poor. However, different from previous findings, the majority and most pensioners are also ill-informed about the rank of public spending on old-age pensions, the most widely used social benefit absorbing the largest share of welfare spending. The article provides evidence of the social division of welfare knowledge in Turkish society based mostly on three opportunity-related variables: city of residence, gender and income.

Immigration and the pattern of public spending: evidence from OECD countries

Using a panel of OECD countries, we show that immigration systematically alters the composition of public spending in the destination country. To mitigate bias from the endogenous sorting of immigrants, we use an IV estimation strategy. The instrument is constructed by estimating a bilateral migration model for 24 destination and 208 source countries. We find that the host country responds to the increase in immigrants by adjusting various expenditures, such as by reallocating resources from social welfare to national defense and public order. Our findings imply that (1) immigration affects policy outcomes in areas with a low ethnic or redistributive dimension and (2) immigration may have an insubstantial effect on the total size of government.

A Study on Assessing Government Size, the Composition of Public Spending on Education and Economic Growth in the USA

The paper aimed to assess the effect of government size and the composition of public spending on education on economic growth in the USA. This study is quantitative in which the data has been gathered from the World Data Bank for the past 60 years from 1960 to 2019. The variables which were considered in the study include government size, GDP growth, Inflation, FDI, GDP (Current US$), Education expenditure and GEE as % of GDP concerning the USA. In terms of the analysis, the Augmented Dickey-Fuller (ADF) has been used to determine the unity root. Moreover, the effect has been tested through Augmented Dickey-Fuller (ADF) and Bounds test. It has been determined from the analysis that GDP growth is dependent on the first lag while there is a significant effect of government size and public expenditure on education on GDP. It was also found that the controlling effect of inflation was also significant. The results of this study are restricted to the USA. With respect to the implications, there is a huge significance of these results as the government of the USA can ensure economic growth while increasing the educational expenses.

Do political parties matter? Evidence from German municipalities

Abstract We assess whether the partisanship of local councils affects the level and composition of local public spending by German municipalities. Our identification strategy exploits changes in the party with the absolute majority in the local council, combining an instrumental variable strategy with a matching approach to address potential selection into treatment. We find evidence for strong partisan effects: Communities with a left-wing council majority spend more on ‘people-oriented’ public goods and less on infrastructure than communities with a right-wing dominated council.

Revisiting IMF expenditure conditionality

ABSTRACT We study the long-run relationship between expenditure conditionality in IMF programmes and the composition of public spending. We compile a granular dataset on government expenditure conditions in 115 countries during 1992–2016 and find that it is structural conditionality which delivers lasting benefits. Structural public financial management conditionality has proven effective in boosting long-term levels of education, health, and investment expenditures. We further find that non-structural conditionality (such as spending floors) for raising specific spending categories may come at the expense of other expenditures, such as health. Finally, successful implementation and not mere existence of the conditionality is crucial for improved outcomes.

Public expenditure and growth: the Indian case*

The paper deals with the relationship between public spending and growth as well as the dynamics of the ratio of public debt to GDP. The authors show that a composition of public spending that favors productive expenditures, that is, those with a direct positive effect on the economy's long-run rate of growth, can determine a situation in which the ratio of public debt to GDP is stable, even though the government runs primary deficits. We test our theoretical results by considering the Indian case. Our empirical analysis substantially supports the idea that the dynamics of the economy as well as of the public-debt ratio are contingent on having a public sector that favors productive expenditures.

Immigration and the Pattern of Public Spending: Evidence From OECD Countries

Using a panel of OECD countries, we show that immigration systematically alters the composition of public spending in the destination country. To mitigate the bias from endogenous sorting of immigrants, we use an IV estimation strategy. The instrument is constructed by estimating a bilateral migration model for 24 destination and 208 source countries. We find that the host country responds to the increase in immigrants by adjusting various expenditures — for instance, reallocating resources from social welfare to national defense and public order. Our findings imply that: (1) immigration affects policy outcomes in areas with little ethnic or re-distributive dimension, and (2) the impact of immigration on the total size of government may not be substantial.

Government size, composition of public spending and economic growth in Brazil

The performance of the fiscal policy is largely affected by the relationship between government size, composition of public spending and economic growth. We use a theoretical framework to find optimal relations among these variables and confront them with a panel data for the Brazilian states. Private capital and government spending are substitute inputs in production as the Brazilian states require provision of public spending to fill gaps in the underdeveloped private sector. Public investment and current government expenditures are combined in fixed ratios in the overall government spending due to strong rigidity of the public budget. The optimal share of public investment is considerably lower than current expenditures, as occurs in developing countries characterized by low economic dynamism. Finally, the average tax burden from the data is below the estimated optimal level, meaning that there is space for increasing tax rate without harming economic growth for some Brazilian states.

Female political representation and substantive effects on policies: A literature review

The share of women in political offices has increased considerably over the past few decades in almost every country in the world. Does this matter for policy outcomes? This is the first paper to provide a literature review on the substantive effects of female representation on policies. In developing countries, the increase in female political representation has caused a better provision of public goods, especially with regard to education and health. In developed countries, higher female representation has not affected public policies as measured by spending patterns. However, more recent evidence shows that female representation has induced changes in parliamentary deliberations and specific policy choices (e.g. more public child care) that may not be reflected in the observable composition of public spending. Finally, higher female representation has improved institutional quality by reducing corruption and rent-extraction by those in power.

Government Size, the Composition of Public Spending and Economic Growth in Netherland

The performance of the fiscal policy is influenced significantly by the relationships and associations among the governmental size, the composition public and private spending and the economic growth of a country. The primary goal of this research study is to evaluate the impact of these factors and to evaluate the significance of these factors in the economic growth of the Netherlands. The economy of Netherlands is characterized as the 17th largest in the world and it presents stable and sustainable growth. In this altercation the researcher aimed to evaluate the significance of the governmental spending and size. For this purpose, the researcher used the data from 2004-2014 from the 12 provinces of Netherlands. The data was subjected to a unit root analysis so that the stationarity properties of the panel data can be evaluated. The unit root test results showed that the variables were stationary at I(0). In order to abstain from the endogeneity issues that can be present in such types of datasets the researcher used level and per capita variables as a robustness evaluation. The empirical framework was based upon the Cobb-Douglas production function and used the modern CES substitution elasticities to compute as the inputs of private capital and government spending in the production function. The nonlinear least-squares regression estimation method was used to evaluate the impact of the variables upon one another. The results indicate that the public investments and current governmental disbursements are conjoined in order to account for the inflexibility of the communal budget. Moreover, the governmental spending was found to be greater than 85 percent indicating that the provincial sectors are focused upon the stimulation of the economy.

Voter Preferences, Electoral Promises, and the Composition of Public Spending

We examine whether public spending misallocations can be traced to voter demand characteristics such as political and interpersonal trust, or risk and time preferences. A model of optimal choice under public spending tradeoffs provides testable hypotheses suitable for individual-level evidence. The data come from an original survey in which we presented voters in seven Latin American countries with choices between different types of public spending. Respondents reporting higher mistrust or higher impatience are more likely to choose transfers over public goods; respondents with higher impatience are also more likely to choose current spending over public investment. These patterns appear in two salient policy areas, education and security, and are robust to plausible alternative explanations. Randomized experiments designed to increase demand for public investment have the intended impacts, while also indicating that political mistrust and high impatience attenuate the estimated treatment effects.

Female Political Representation and Substantive Effects on Policies: A Literature Review

The share of women in political offices has increased considerably over the past few decades in almost every country in the world. Does this matter for policy outcomes? This is the first paper to provide a literature review on the substantive effects of female representation on policies. In developing countries, the increase in female political representation has caused a better provision of public goods, especially with regard to education and health. In developed countries, higher female representation has not affected public policies as measured by spending patterns. However, more recent evidence shows that female representation has induced changes in parliamentary deliberations and specific policy choices (e.g. more public child care) that may not be reflected in the observable composition of public spending. Finally, higher female representation has improved institutional quality by reducing corruption and rent-extraction by those in power.