Public Spending Research Articles

The Fiscal Capitalization of Public Spending: Does Municipal Operating and Capital Spending Increase Property Values?

This study investigates the impact of local public spending on property values. The theory of fiscal capitalization, first proposed by Charles Tiebout and Wallace Oates, holds that a positive relationship exists between local public spending and property values. The theory posits that individuals and businesses make locational decisions based on their preferences for a community’s mix of taxes and spending on services. Although an extensive literature exists supporting fiscal capitalization, studies rarely investigate the separate effects of operating versus capital expenditures. Furthermore, few studies have investigated whether a distinct capitalization effect exists between the signal created by ongoing capital expenditures and a longer term amenity effect realized once projects are completed. This article extends the fiscal capitalization theory by assessing these distinctive effects on property values. The study uses a border discontinuity research design, limiting the sample to residential properties near municipal boundaries. The results show capital and operating expenditures have different effects on property values. In addition, the spending on capital improvements has short-term and long-term effects in the property market. The findings provide local policymakers with guidance on the relative benefits of operating versus capital spending when balancing the two choices.

Can Social Policy Alleviate Loneliness Among Older Adults? A Comparative Analysis of OECD Countries

ABSTRACT Loneliness in old age is a multifaceted issue influenced by personal, social, and environmental factors, necessitating a holistic approach. However, most research has predominantly focused on individual-level risk factors, with limited attention given to institutional factors such as social policy. This study investigated how social policies impact loneliness among older adults. Multi-level analysis was conducted using data from the 2017 wave of International Social Survey Programme, involving 6,337 older adults from 23 OECD countries. The analysis revealed that higher public spending on welfare and old-age pensions significantly reduces the likelihood of loneliness among older adults. These findings confirm the protective role of generous social policies in addressing old-age loneliness. They underscore the need for long-term changes in welfare systems to enhance the public response to the significant social risk posed by old-age loneliness.

Technological and market sensing capabilities as drivers of SME participation in public procurement: an empirical test of the moderating role of financial capability

Technological and market sensing capabilities as drivers of SME participation in public procurement: an empirical test of the moderating role of financial capability

Saving Millions in Government Procurement Through Data Science and Market Design

Saving Millions in Government Procurement Through Data Science and Market Design

Import substitution of elevator equipment in public procurements: problems and directions of stimulation

The problem of import substitution is relevant for any country, taken into account the requirements of its economic self-sufficiency, independence on the situation at the international markets and on geopolitical changes. For Ukraine in the state of full-scale war, this task is important from the viewpoints of economic resilience and security. For this reason, the Government determined the substitution of import components in public procurements as one of the priorities of its activity. Solving this problem will be important for the projects associated with the procurement for the recovery of infrastructure in post-war period. The sector of elevator equipment production has a significant industrial potential for the post-war recovery of infrastructure in Ukraine. Extension of industrial capacity of this segment of machine building in order to cover the domestic market requirements in post-war recovery period will enable new job creation and will provide a multiplicative effect based on the development of complementary suppliers of production components. However, a number of problems prevents Ukrainian elevator equipment producers from winning in public procurements. The goal of the article is to substantiate the reasonability and to determine the directions and stimulating measures for elevator equipment import substitution in public procurements in Ukraine. The market of elevator equipment of Ukraine has been analyzed. The capacity of Ukrainian elevator equipment producers to compete at the domestic market has been assessed based on price, warranty terms, cost of warranty service, and quality of equipment. Public procurement of elevator equipment and maintenance services in “Prozorro” system has been studied. It was found that about 70 % of public procurements of elevator equipment account for the purchases of imported equipment from Turkey and China. The problems of domestic producers of elevator equipment preventing them from winning the public procurement have been explained. The multiplicative effect from the increase of public procurements of elevator equipment from national producers has been assessed. This proves the reasonability to stimulate import substitution of elevator equipment in public procurements. The directions and measures of elevator equipment import substitution stimulation in public procurements in Ukraine have been suggested.

Contract award criteria in public procurement procedures – The possibility of improving the situation of society from the perspective of the European Union and Poland

Background Public tenders are vital for a country’s GDP and citizens’ quality of life, enabling public administration to achieve various goals. Developing and developed countries allocate over 10% of their GDP to public procurement. This highlights the significant societal support public tenders can provide, making it important to consider how they can further benefit society. Policy and implications Public procurement can achieve policy objectives and benefit society by selecting tenders based on criteria beyond price, such as economic advantage and social benefits. This approach, endorsed by EU directives since 2014, encourages innovation and socially responsible practices. Contracting authorities in the EU can use social, environmental, and qualitative criteria to determine the most advantageous offers. Poland’s Public Procurement Law (PPL) allows contract award criteria based on quality and price, including social aspects. Contracting authorities can specify criteria like employing marginalized groups, though these criteria often face scrutiny and legal challenges. Non-price criteria aim to enhance competition and achieve social, environmental, and economic goals. Recommendations EU and Polish laws permit and encourage using social aspects as contract award criteria in public procurement. However, contracting authorities must analyze priorities, risk balancing, time constraints, and departmental coordination to effectively implement these criteria. This approach can improve the social situation and support specific groups. Conclusions Public procurement significantly influences a country’s economy and quality of life, with EU and Polish laws allowing social criteria in contract awards. Directive 2014/24/EU supports tenders based on economic and social benefits. Poland’s PPL aligns with this, emphasizing marginalized group employment. Effective implementation fosters job creation, social integration, and improved living standards.

Identifying Key Causal Factors of “Outsourcing Failure” in Government Procurement of Public Service Based on Interval Type‐2 Fuzzy DEMATEL‐Prospect Theory

ABSTRACTAccurately identifying the key causal factors of “outsourcing failure” in government procurement of public service (GPPS) is the focus when constructing its corrective mechanism. The research process and contributions of this paper unfold in two parts: First, based on the structure‐process‐outcome (SPO) model, from the three dimensions of structure, process and outcome, constructing a library of factors causing “outsourcing failure” in GPPS. Then aiming at the ambiguity, uncertainty, and risk preference of decision makers in the decision‐making process, this study proposes a method to identify the key causal factors of “outsourcing failure” in GPPS based on interval type‐2 fuzzy decision‐making trial and evaluation laboratory (DEMATEL)‐prospect theory. We take government procurement of home‐based care services in Jiangsu Province as an example. The results show that nine key causal factors were identified. Further, targeted correction suggestions are proposed to provide strong support and reference for improving the effect of GPPS outsourcing.

Advancing Small Business Inclusion in Public Procurement: Evidence From U.S. Federal Government R&D Contracts

To encourage small business inclusion in public procurement, the U.S. federal government has established the set-aside program that mandates government agencies to award a portion of their contracts to small businesses. We study whether and to what extent the performance of R&D contracts awarded through this program differs from those awarded through open competition. Analyzing a large dataset of federal R&D contracts, we find that despite restricting competition to small businesses, set-aside R&D contracts experience lower schedule and cost overrun than R&D contracts awarded through open competition. Furthermore, although set-aside R&D contracts experience lower schedule and cost overrun when they are awarded to more experienced contractor firms, this benefit arises primarily from a contractor firm's experience in executing R&D contracts across different agencies compared to the firm's experience with the same agency. Finally, set-aside R&D contracts awarded early in a fiscal year experience lower schedule and cost overrun than those awarded later. Post-hoc analysis examining the underlying dimensions of different-agency experience highlights the asymmetric effects of related-agency experience and unrelated-agency experience of contractor firms on the performance of set-aside R&D contracts awarded by the Department of Defense. While related-agency experience improves contract performance, unrelated-agency experience has a detrimental effect on contract performance. These findings demonstrate that small business inclusion policies may not necessarily compromise contract performance. Importantly, they emphasize the need for federal agencies and contracting officers to consider the underlying dimensions of contractor firm experience and contract award timing to improve contract performance and taxpayer money utilization.

Effects of public procurement on corporate total-factor carbon productivity: evidence from China

Using balanced panel data for listed Chinese industrial firms from 2016 to 2021, this study examines the effect of public procurement (PP) on corporate total-factor carbon productivity (CTFCP) and the related mechanisms. The results show that (1) there is a positive correlation between PP and CTFCP. (2) PP exerts a more pronounced incentivizing effect on CTFCP for state-owned enterprises, larger corporations, and those with weaker financing constraints. (3) We decompose CTFCP into technological progress (TECH), pure technical efficiency (PTE), and scale efficiency (SE) and find that PP improves TECH and PTE, and the effect differs according to firm ownership, scale, and financing constraints. (4) PP promotes CTFCP through labor productivity (LP), capital productivity (CP), and corporate green innovation (CGI) while the mediating role of environmental productivity (EP) is not significant. This study contributes to theoretical discourse on PP’s influence on CTFCP and has practical implications for PP agencies and enterprises.

Assessment of Public Spending Efficiency of Health and Education in Nigeria

This study analysed the efficiency of Nigeria’s public spending in the health and education sectors using the non-parametric Data Envelopment analysis (DEA) approach. It further examined the environmental variables (which can be economic, institutional or demographic factors) influencing public spending efficiency in these sectors for the period 2000–2022 using censored Tobit regression and fractional logistic regression. The empirical results showed that the average public spending efficiency scores of health and education are 0.979 and 0.912, respectively, implying that Nigeria can still improve the efficiency of these two sectors even though it is relatively high. The second analyses of the regression results revealed that broad money and the size of government spending are the economic variables which have significant influence on the efficiency of both the health and education sectors. Control of corruption and government effectiveness are the government institutional variables that have a significant influence on efficiency. Both urbanization and population growth have been found to significantly influence public spending efficiency. This study strongly recommends the deliberate implementation of policies and measures that will improve the performance of government institutions and the development of secured urban centres in Nigeria, which will help ensure improvement in public spending efficiency in Nigeria.

Agenda of Federal System in Nepal: Nexus of Fiscal Federalism and Controlled Corruption

This research critically assesses Nepal's fiscal federalism, focusing on the interconnectedness of budget allocation, spending, revenue generation, and corruption at the provincial level. Using a mixed-methods approach, the study combines quantitative data analysis with qualitative insights to evaluate how weaknesses in fiscal management erode public trust in federalism. The findings show that while decentralizing power and resources is a core objective of the federal system, provincial governments remain heavily dependent on federal transfers due to limited internal revenue generation. The study reveals that provinces fall short of meeting public expectations, primarily due to insufficient and poorly managed expenditure capacities, resulting in substantial underperformance. Additionally, the research identifies a significant correlation between increased budget allocation and corruption, highlighting that higher public spending often leads to financial misconduct. This is reflected in unspent budgets and frequent misuse of public funds, which amplify public dissatisfaction with the federal system. The study emphasizes the need for improved fiscal autonomy, stronger accountability frameworks, and more effective resource-sharing mechanisms to enhance the efficiency of provincial governments and address rising concerns about the viability of federalism.

Green public procurement and corporate environmental performance: An empirical analysis based on data from green procurement contracts

Green public procurement (GPP) is regarded as a vital tool for achieving energy conservation and emission reduction. This policy aims to guide enterprises towards cleaner production by creating market demand for green products on the demand side. However, it remains unclear whether GPP can genuinely improve corporate environmental performance. This study reviews relevant policy documents and constructs a wordlist of “green procurement contract" using the Word2vec model. By employing text analysis, we identify public procurement contracts that meet green standards. Subsequently, we match these contracts with data from China's A-share-listed companies to empirically test the impact of GPP contracts on corporate environmental performance. The findings reveal that GPP significantly enhances corporate environmental performance, primarily through conceptual governance effects, source governance effects, terminal governance effects, and supervision governance effects. Heterogeneity analysis indicates that this environmental incentive effect is particularly significant among non-state-owned enterprises and small and medium-sized enterprises. Additionally, the effect is more pronounced in regions with high government environmental awareness and moderate environmental enforcement intensity. Further analysis shows that GPP also improves corporate social responsibility performance and promotes corporate ESG performance, thereby fostering sustainable development. Moreover, the study points out that increasing the transparency of information disclosure, enhancing procurement efficiency, and maintaining the stability of procurement relationships all contribute to strengthening the environmental performance incentive effect of GPP. This article helps to deepen the understanding of the “proactive government” promoting the development of green economy and also provides theoretical reference for the breakthrough of corporate green transformation under the target of “dual carbon.”

“Going once, going twice, sold!”: A new look at the auction tilt in public procurement

The paper examines the auction tilt phenomenon in public procurement in terms of the transaction mechanisms of governance. Arguments to develop the discussion on limits of using auctions expediency and consequences of their forced distribution in public sector procurement are proposed. The reasons for maintaining the auction tilt despite the recognition of this practice as vicious in some jurisdictions and its numerous criticisms in the literature are explained. Transaction cost theory tools helped identify the failures of theoretical ideas about the effectiveness of auctions as attempts to bring the governance mechanism closer to the market one. Using heuristic models within the framework of the theory of transaction costs, a mechanism has been demonstrated that promotes the sustainability of the practice of regulated procurement with an auction bias, which is ineffective for a wide class of goods (works, services).

The state house prices make: the political elasticities of house prices and rents

ABSTARCT Fiscal policy allocation is not purely determined by the labour-capital conflict, but increasingly around cross-class housing coalitions. Although rising house prices are conventionally understood as drivers of fiscal austerity, this view has been challenged. Alternatively, governments may use fiscal policies to support house price growth to meet the primary economic interests of homeowners and compensate non-homeowners through the welfare system. Using an econometric analysis of 19 advanced economies between 1980 and 2018, we show house prices have positive effects on taxation revenue as well as fiscal spending on public investment, welfare and education. A second multi-level analysis provides a political explanation of this observed outcome by demonstrating parties respond to rising house prices by proposing more welfare and public investment spending in their manifestos. Conterminously rising house prices and rents also lead to greater welfare spending, suggesting governments use fiscal policy to protect those excluded from homeownership from labour market risks.

Can individual MPs damage their party's brand? Quasi-experimental evidence from a public procurement corruption scandal

Can individual MPs damage their party's brand? Quasi-experimental evidence from a public procurement corruption scandal

How Productivity, Capital Investment, Employment, Human Capital and Energy Are Affecting Economic Growth in Morocco? An ARDL, FMOLS, DOLS and CCR Approaches

Abstract This paper aims to scrutinize the effects of; productivity, capital investment, human capital, employment and energy intensity; on economic growth in Morocco under the Energy-augmented Cobb Douglas production function (CDPF) framework, using extended data from 1965 to 2022. The ADF unit root test confirmed the existence of cointegration among variables, then, the ARDL BTA/ECM model proved the presence of long-term relationship within, in which the explanatory variables progress all together positively and proportionally to generate economic growth, just as stipulate the standard CDPF. The outputs reliability was validated by FMOLS, DOLS, and CCR tests. Results implies that an additional unit in GDP corresponds, in terms of units to, 1.87 in productivity level, 0.12 in capital investment, 4.19 in of human capital, 0.98 in labor force and 2.52 in energy intensity, that Moroccan economy is human capital intensive unlike when it comes to physical capital. In the light of this findings, we think that Morocco should accelerate its industrial transition, proceed to a large modernization and mechanisation of its agriculture in order to inspire more productivity to its entire economy, keep acting in the sense of more structural reforms to improve the business environment, share out the public spending equitably following two dimensions, physical by upgrading local infrastructure to attract more investments, human by promoting human capital through education and social protection.

Impact of public health expenditure on malnutrition among Peruvians during the period 2010-2020: A panel data analysis

Background The study analyzes the impact of public health spending on malnutrition among Peruvians, using data from the National Household Survey, the Central Reserve Bank of Peru, the National Institute of Statistics and Informatics and the Ministry of Economy and Finance from 2010. -2020. Previous studies have revealed the existing relationship of health spending with the reduction of malnutrition. Methods A quantitative approach is considered, with an explanatory type of research using panel data methodology considering the bidimensionality of the data, which allows quantifying this effect for the Peruvian case using the National Household Survey, data from the Central Reserve Bank of Peru, as well as information from the National Institute of Statistics and Informatics and the Transparency Portal of the Ministry of Economy and Finance in the period 2010-2020. Results The results show that public expenditure on health has a negative relationship with malnutrition; the rural sector has a positive relationship with malnutrition given the limitations present for access to adequate food. Similarly, the unemployment rate shows a positive relationship with malnutrition, given that being unemployed leads to a higher cause of malnutrition in the population, and the gross domestic product has a negative relationship with malnutrition, given that greater economic growth produces an impact on reducing malnutrition, with the greatest impact being on the rural population and the gross domestic product. Conclusions In the analysis period 2010-2020 in Peru, based on the panel data analysis, the impact of public health expenditure on reducing malnutrition is observed in 10 departments, achieving a reduction in malnutrition; while in 14 departments, this indicator has not been reduced.

A Quest for State Contracts: Public Procurement and the Shaping of Competitiveness in Development Consulting

What does it take to win a public contract in development consulting? I address this question based on interviews with 27 public buyers and private vendors of consulting services in Sweden, as well as an in-depth archival analysis of the consultancy procurements undertaken by the Swedish public aid agency, Sida, during 2018–2020. Results point to three dimensions of competitiveness in consulting: social, organizational and individual. These unravel a number of contradictions in contracting practices and discourses, tied to Sida’s evolving negotiation of new public management paradigms. Specifically, they illustrate how success in tendering depends not (only) on adhering to free-market ideals of cost-efficiency or public sector tenets of transparency and fairness. Importantly, it relies on relational labour and investments in the largely informal social fabric of contracting.

Language as a trade barrier in public procurement: Evidence from Georgia's policies on English language documentation

Language as a trade barrier in public procurement: Evidence from Georgia's policies on English language documentation

Prevention and Detection of Bid Rigging in Public Procurement in India: Role of Artificial Intelligence

India’s National Crime Record Bureau’s report, ‘Crime in India’, stipulates that the conviction rate of economic crimes is only 29.4% which is way lesser than that of criminal conviction rate of 57%. Punitive measures under the Competition Act, 2002 are relatively less explored in the Indian context. This article is an attempt to examine the punitive measures in the Act, the evidence used for conviction and to see how the same deter the violators. An attempt is made to find out how the apex court in Rajasthan Cylinders case ( Rajasthan Cylinders and Containers Ltd v. UOI and Anr., 2018 SCC Online SC 1718.) might have diluted the already weak conviction rate of India. Artificial intelligence is used in many jurisdictions for cartel identification. The evidentiary standards in Indian jurisdiction in regard to cartel identification are almost equivalent to ‘beyond reasonable doubt’ instead of ‘preponderance of probability’. Need arises that the evidentiary jurisprudence of ‘reverse onus or reverse burden’, whereby shifting the burden of proof on the accused, should be used liberally in instances of anticompetitive practices. Did the apex court fail? If digital algorithms are there to guide and highlight the red flags in clandestine cartelization, how will the jurisdictions use them to counter the anti-competitive practices?