Spending Categories Research Articles

Does the Composition of Government Expenditure Matter for Long‐Run GDP Levels?

We examine the long‐run GDP impacts of changes in total government expenditure and in the shares of different spending categories for a sample of OECD countries since the 1970s, taking account of methods of financing expenditure changes and possible endogenous relationships. We provide more systematic empirical evidence than available hitherto for OECD countries, obtaining strong evidence that reallocating total spending towards infrastructure and education is positive for long‐run output levels. Reallocating spending towards social welfare (and away from all other expenditure categories pro‐rata) may be associated with modest negative effects on output in the long run.

FISCAL SPENDING AND ECONOMIC GROWTH

(ProQuest: ... denotes formulae omitted.)1. INTRODUCTIONStruggling to overcome the global financial crisis that began in 2008, policymakers worldwide began to take increasing interest in the active role that fiscal policy could play in managing such a crisis. The dragging financial crisis in Europe and the rut of slow economic growth worldwide have further prompted governments and researchers alike to look for possible fiscal measures that can induce stable economic growth.The onset of the latest global financial crisis has led the majority of governments worldwide to adopt an expansionary fiscal stance, which has quickly worsened the fiscal deficits in many countries. These states thus took a radical turn in the other direction and began to focus on securing greater fiscal resources so as to quicken the fiscal recovery process and brace for possible fluctuations in the business cycle in the future. As low economic growth has become a norm around the globe, governments have persisted in their policies for fiscal stabilization, while also introducing diverse new measures to promote stable economic growth.This study is a response to the need for more and wider-ranging research on the correlation between fiscal policy and economic growth and surveys the recent debates on the diverse ways fiscal spending affects economic growth so as to help policymakers make the right choices in the future.This study provides a holistic overview of the many partial debates and arguments that have been put forward recently regarding the correlation between fiscal spending and economic growth. Moreover, this study also provides an empirical analysis of the effects that fiscal spending of diverse purposes exerts on economic growth using a consistent and uniform standard that can be applied to various countries around the world, thereby delineating the implications of policy on fiscal resource distribution in the future. This study groups fiscal spending into a few categories and examines each in terms of defining characteristics.The organization of this paper is as follows. Section 2 provides a survey of the established literature discussing how different fiscal spending items or categories affect economic growth and examines recent trends and patterns in fiscal spending item by item in OECD member states. Section 3 applies an endogenous growth model in order to demonstrate how fiscal spending and the structural changes thereof affect economic growth. Section 4 provides an empirical analysis based on a fixed-effect model. The analysis compares the OECD member countries with one another in order to determine the relationships between fiscal spending of various categories and economic growth. Section 5 sums up the findings and suggest some policy implications.2. FISCAL SPENDING AND ECONOMIC GROWTH: RECENT TRENDSThere is a well-established and flourishing body of literature on the impact of government spending on economic growth at multiple levels and via diverse channels. These studies serve to spark public controversies and raise key issues in one way or another. We study the established literature to find and redefine the categories of fiscal spending to examine their impact on economic growth.Pitlik and Schratzenstaller (2011) divide fiscal spending into two categories, namely, productive and unproductive expenditure. The former consists of core government spending, infrastructure expenditure, and merit-goods spending programs. The latter consists of redistribution, interest expenditure, and other types of spending. These categories indeed neatly match the functional spending categories listed in the Classification of Functional Expenditure of Governments (COFOG), used by such international organizations as the IMF, the United Nations (UN), and the OECD. Table 1 matches these functional categories of fiscal spending with the categories of fiscal spending found in theory and in real-life practices. …

An examination of the determinants of Irish household sports expenditures and the effects of the economic recession

ABSTRACTResearch question: This study examines the determinants of four household sport expenditure items. The primary objective is to examine the effects of the recent economic recession in Ireland on these expenditures. This study is the first to analyse Irish household sport expenditure data and the first to study the effects of the economic recession on these items.Research methods: Data from the 2004/2005 and 2009/2010 Irish Household Budget Surveys, a period which covers the economic recession in Ireland, are employed. A Tobit model is estimated as each of the four sports expenditures has a large amount of zero expenditures.Results and findings: The social and economic characteristics of Irish households affect each sports item in differing ways. The presence of children of a particular age appears to be a strong determinant of spending on categories of sports which involve more physical activity (sport participation and leisure fees). Other categories of sports are influenced more by income (attendance at sporting events) and age and social status (club subscriptions). For some categories of sport spending there is a strong link with how the economy is performing, whereas for others household characteristics play just as important a role.Implications: This research has shown that sport is a multi-faceted product. Its determinants and how it is affected by economic downturns depends on the type of expenditure examined. For spending on certain categories the recession has had a clear negative effect, whereas for others it has been neutral. These are important considerations for sports managers and policy-makers when devising their strategies.

An error-correction modeling of US consumer spending: are there asymmetries?

Purpose – The purpose of this paper is to investigate four possible asymmetries in US aggregate consumption and its major components (durables, non-durables, and services) for the period 1990-2013. Understanding the asymmetric behavior of the components is important since the impact of monetary policy on separate consumer spending categories may differ substantially. Design/methodology/approach – The authors first employ stationarity and cointegration tests to specify and estimate the long-run equilibrium relationship between consumer spending and such variables as disposable income, consumer sentiment, and the expected real interest rate. The authors then specify a structural error-correction model for each spending category to simultaneously investigate such possible asymmetries due to the ratchet effect, psychological negativity bias, interest rate effect, and varying degree of adjustment in eliminating disequilibrium defined as the gap between actual and desired spending. Findings – First, consumption and its major components all display asymmetric behavior consistent with psychological negativity bias. Second, consumer spending on durable goods also displays asymmetries consistent with both the ratchet effect and the interest rate effect. Third, non-durables respond asymmetrically to disequilibrium; consumers adjust (increase) spending on non-durables only when actual spending is below desired spending on non-durable goods. Fourth, services also respond asymmetrically to disequilibrium; consumers adjust (reduce) spending on services only when actual spending is above desired spending on services. Originality/value – This study provides new insight on the asymmetric behavior of consumer spending. The authors believe that the findings should help with macroeconomic policymaking when such indicators as income, consumer sentiment, and expected real interest rates display significant variations.

Impact of Aid and Public Spending—A Macro–micro Framework

AbstractIn this study, we have used Tanzania as a case to illustrate how a simulation model can be used to evaluate the impact of aid and the trade‐offs between public spending categories and their impact on income poverty and other social development targets. Our results suggest the following. First, under plausible growth, fiscal and foreign assistance assumptions, in line with observed patterns, the enormous difficulty of achieving most millennium development goals (MDGs) by 2015 is evident. Second, there existed trade‐offs between the various MDGs, in particular between achievements for poverty and other social development targets. © 2015 UNU‐WIDER. Journal of International Development published by John Wiley & Sons, Ltd.

Political institutions and government spending behavior: theory and evidence from Iran

This study examines how the quality of political institutions affects the distribution of the government budget in Iran. We first introduce a mechanism through which democracy can shift government expenditure from national defense (military) to productivity-enhancing public spending (e.g., education). Using impulse response functions and a variance decomposition analysis on the basis of a vector autoregressive (VAR) model, our results imply that the response of military spending to an improvement (a deterioration) of democratic institutions is negative (positive) and statistically significant, whereas that of education spending is positive (negative) and significant. Our results are robust to other indicators of political institutions, different orderings of variables in the VAR, and alternative specifications of government spending categories.

Time and Money: The True Costs of Health Care Utilization for Patients Receiving "Free" HIV/Tuberculosis Care and Treatment in Rural KwaZulu-Natal.

HIV and tuberculosis (TB) services are provided free of charge in many sub-Saharan African countries, but patients still incur costs. Patient-exit interviews were conducted in primary health care clinics in rural South Africa with representative samples of 200 HIV-infected patients enrolled in a pre-antiretroviral treatment (pre-ART) program, 300 patients receiving antiretroviral treatment (ART), and 300 patients receiving TB treatment. For each group, we calculated health expenditures across different spending categories, time spent traveling to and using services, and how patients financed their spending. Associations between patient group and costs were assessed in multivariate regression models. Total monthly health expenditures [1 USD = 7.3 South African Rand (ZAR)] were ZAR 171 [95% confidence interval (CI): 134 to 207] for pre-ART, ZAR 164 (95% CI: 141 to 187) for ART, and ZAR 122 (95% CI: 105 to 140) for TB patients (P = 0.01). Total monthly time costs (in hours) were 3.4 (95% CI: 3.3 to 3.5) for pre-ART, 5.0 (95% CI: 4.7 to 5.3) for ART, and 3.2 (95% CI: 2.9 to 3.4) for TB patients (P < 0.01). Although overall patient costs were similar across groups, pre-ART patients spent on average ZAR 29.2 more on traditional healers and ZAR 25.9 more on chemists and private doctors than ART patients, whereas ART patients spent ZAR 34.0 more than pre-ART patients on transport to clinics (P < 0.05 for all results). Thirty-one percent of pre-ART, 39% of ART, and 41% of TB patients borrowed money or sold assets to finance health care. Patients receiving nominally free care for HIV/TB face large private costs, commonly leading to financial distress. Subsidized transport, fewer clinic visits, and drug pick-up points closer to home could reduce costs for ART patients, potentially improving retention and adherence. Large expenditure on alternative care among pre-ART patients suggests that transitioning patients to ART earlier, as under HIV treatment-as-prevention policies, may not substantially increase patients' financial burden.

Who benefits from big government? A life satisfaction approach

Which impact does government size have on life satisfaction, and how do effects of bigger government differ between income groups in society? Previous studies typically employed country averages and thus neglected possibly heterogeneous happiness effects between income groups. This paper addresses empirically the effects of government spending on subjective well-being of individuals belonging to different income groups. Our analysis is based on individual data from 25 European countries participating in the European Social Survey. In contrast to most previous studies we take account of the endogeneity between relative income position and reported life satisfaction by an instrumental variable approach. Our results suggest, first, that most government spending categories, including social protection, are on average negatively related to individual well-being. Secondly, estimated marginal effects of health, education and social protection spending at different income levels show that spending increases always have a stronger negative effect on high income groups’ well-being than on low income groups’ life satisfaction. For all government spending categories, marginal happiness effects of higher public spending are clearly negative for income groups at the top.

Impact of the global financial crisis on health spending in developed countries

Declines in income, high deficits and debt (caused by the global financial crisis of 2008–2010) forced many countries to take action to contribute to saving and changing socio-economic structure. The study shows the consequences of the downturn for the healthcare sector. The article aims to provide answers to questions concerning the adjustment of health expenditure, in particular the scale and pace of their possible reduction in high-pressure situations on the part of public finances. The article describes evolution of basic economic parameters, then the figures and trends in the different categories of health spending. Also conditions for rescue programs on an international scale are presented.

Endogenous intangible resources and their place in the institutional hierarchy

This paper seeks to find evidence for the impact of local culture on the share of intangible investments and the results for productivity per worker in the EU15 countries at the NUTS2 level during the period 2000–2008. The main scope of the paper is to explore the nature and consequences of intangible resources and their hierarchical relationship with culture, thus seeking to identify the genuine endogenous sources of local productivity beyond the standard Romer-type of models. In our study we use basic economic and social indicators from two main sources: the EUROSTAT Regional Database and the European Social Survey (ESS). Regression analysis, based on a pooled cross-section and on a balanced panel through a generalized method of moments (GMM) approach, shows evidence in support of: (i) the classical Tiebout hypothesis on cultural dependence of local public goods in the case of three different types of intangible investments: education, health care, and research and development; (ii) the impact of intangible investments on local productivity which confirms their treatment as investments rather than their usual treatment as a spending category in the national accounts. Clearly, the data set used has its limitations, but what remains most noticeable is the added value of the methodologically alternative measures of local culture employed in our analysis, i.e. a novel cultural attitudes Herfindahl Index, a cultural attitudes Segregation Index, and a CBD (Culture-Based Development) two-vector approach (living culture and cultural heritage). The results generated depict a confirmative picture of the hierarchical relationship between intangible investments, culture and productivity at the regional scale in Europe.

Parental Spending on School-Age Children: Structural Stratification and Parental Expectation

As consumption expenditures are increasingly recognized as direct measures of children's material well-being, they provide new insights into the process of intergenerational transfers from parents to children. Little is known, however, about how parents allocate financial resources to individual children. To fill this gap, we develop a conceptual framework based on stratification theory, human capital theory, and the child-development perspective; exploit unique child-level expenditure data from Child Supplements of the PSID; and employ quantile regression to model the distribution of parental spending on children. Overall, we find strong evidence supporting our hypotheses regarding the effects of socioeconomic status (SES), race, and parental expectation. Our nuanced estimates suggest that (1) parental education, occupation, and family income have differential effects on parental spending, with education being the most influential determinant; (2) net of SES, race continues to be a significant predictor of parental spending on children; and (3) parental expectation plays a crucial role in determining whether parents place a premium on child development in spending and how parents prioritize different categories of spending.

Income Changes and Consumption: Evidence from the 2013 Federal Government Shutdown

We use the 2013 federal government shutdown and a rich data set from an online personal finance website to study the effects of changes in income on changes in consumption. The 2013 shutdown represented a significant and unanticipated income shock for federal government workers, with no direct effect on permanent income. We exploit both the differences between unaffected state employees and affected federal employees as well as between federal employees required to remain at work and those required to stay at home to generate variation in income and leisure time. We find strong evidence for excess sensitivity of consumption patterns, violating the permanent income hypothesis. We demonstrate that this decline in spending can be largely explained by increased home production, changes in spending allocations, and credit constraints. We are able to discern detailed categories of household spending with widely varying elasticities. The results demonstrate the importance of household liquidity, leisure and home production when constructing stimulus or social insurance policy.

Political Institutions and Government Spending Behavior: Theory and Evidence from Iran

This study examines how quality of political institutions affects the distribution of government budget in Iran. We first introduce a mechanism through which this can shift government expenditure from patronage to more constructive public spending. Using impulse response functions (IRF) and variance decomposition analysis (VDC) on the basis of Vector Autoregressive (VAR) model, our results imply that a positive shock towards more democratic institutions leads to negative and statistically significant response of military spending and positive and statistically significant response of education expenditures. Our results are robust to different political institutional quality indicators, ordering of variables in the VAR and different specifications of government spending categories.

The Physician Payments Sunshine Act: Data Evaluation Regarding Payments to Ophthalmologists

To review data for ophthalmologists published online from the Physician Payments Sunshine Act. Retrospective data review using data acquired from a publicly available electronic database. A database was downloaded from the Centers for Medicare and Medicaid Services website under Identified General Payments to Physicians and a primary specialty of ophthalmology. Basic statistical analysis was performed including mean, median, and range of payments for both single payments and per provider. Data summary by category of payment and geographic region and comparison with other surgical subspecialties. From August 1, 2013, through December 31, 2013, a total of 55 996 individual payments were reported to 9855 ophthalmologists for a total of $10 926 447. The mean amount received in a single payment was $195.13 (range, $0.04-$193 073). The mean amount received per physician identifier (ID) was $1108 (range, $1-$397 849), and the median amount was $112.01. Consulting fees made up the largest percentage of fees. There was not a large difference in payments received by region. The mean payments for the subspecialties of dermatology, neurosurgery, orthopedic surgery, and urology ranged from $954 to $6980, and median payments in each field by physician ID ranged from $88 to $173. A large amount of data were released by the Centers for Medicare and Medicaid Services for the Physician Payment Sunshine Act. In ophthalmology, mean and median payments per physician did not vary greatly from other surgical subspecialties. Most single payments were less than $100, and most physicians received less than $500 in total payments. Payments for consulting made up the largest category of spending. How this affects patient perception, patient care, and medical costs warrants further study.

On the Composition of Public Spending and Taxes

This paper studies the implications of changes in the fiscal (spending-tax) policy mix when all categories of spending and taxes are according to their functional breakdown. In so doing, we build a general equilibrium OLG model which naturally incorporates the main functional categories of public spending and taxes as in the euro area. Departing from the crisis year of 2008, the main result is that an increase in public spending on education and health would have outperformed all other changes in fiscal policy that have either happened or have been debated in policy circles.

Assessing The Impact Of Fiscal Shocks On Output In MENAP Countries

This note is a reference guide to the econometric work on fiscal multipliers for MENAP countries. Spending and tax multipliers are estimated from conventional VAR models and identified using a sign-restrictions approach. Estimates show that fiscal multipliers tend to be small, except for those associated with government investment spending, which generally exceed unity. For the average MENAP country, fiscal multipliers for current spending, government consumption and government investment spending are 0.5, 0.8, and 1.1,respectively, while the tax revenues multiplier is estimated at around –0.4. There is also significant variation in the size of these multipliers across countries, consistent with differences in economic fundamentals, such as openness to trade and the flexibility of the exchange rate. The estimated multipliers are generally consistent with theoretical priors, and are in line with the evidence from the literature for other economies and categories of spending and taxes.

Implications of Public External Debt for Social Spending: A Case Study of Selected Asian Developing Countries

For developing countries with budgetary and balance-of-payments gaps to meet, maintaining large stakes of external debt is not free of cost. Highly indebted countries have to set aside a sizeable fraction of their scarce resources to service their debt, which naturally affects their development spending in general and allocations for the social sector in particular. This study examines the behavior of seven developing Asian countries and analyzes the impact of public external debt on social sector spending. The panel dataset includes Pakistan, India, Bangladesh, Sri Lanka, Nepal, the Philippines, and Indonesia, and spans the period 1980–2010. Our empirical analysis is based on three interrelated equations for different spending categories, which are estimated using the general method of moments. The study’s results confirm the common wisdom that outstanding external debt and its servicing liability have an adverse impact on public spending, particularly on social sector spending. This suggests that developing countries need to mobilize their own resources and minimize their dependence on external borrowing as far as possible.

Diminishing Health, Rising Health Care Costs and Long-Run Growth in Local Government Spending

Real local government spending in the United States has increased by 240% between 1972 and 2012, faster than can be explained by population growth (a 48% increase), growth in median household income (a 32% increase), or changes in other economic, demographic, and institutional variables typically used to explain the pattern in local government spending. In this paper we examine the role of other potential drivers of local government growth such as growing income disparity, the increasing number of single female-headed households, increasing number of household living in mobile homes, rising healthcare costs, and diminishing health such as increasing in obesity (and associated physical health problems) as well behavioral problems such as hyperactivity, anxiety, depression, and violence associated with the changing diet of the American people. Since the 1970s, the obesity rate in the United States has increased from 12% to 35%. Using the obesity rate as a proxy for changing health, we find that increasing mental/emotional/physical health problems accounts for a significant portion of increased local government spending growth, particularly in human services such as education that require behavioral management. We also find that as local government spending in other spending categories decline with obesity. These findings suggest that deteriorating mental/ emotional/physical health resulting from dietary changes and other factors has increased local government spending and shifted spending priorities.

Political Institutions and Government Spending Behavior: Theory and Evidence from Iran

This study examines how quality of political institutions affects the distribution of government budget in Iran. We first introduce a mechanism through which this can shift government expenditure from patronage to more constructive public spending. Using impulse response functions (IRF) and variance decomposition analysis (VDC) on the basis of Vector Autoregressive (VAR) model, our results imply that a positive shock towards more democratic institutions leads to negative and statistically significant response of military spending and positive and statistically significant response of education expendi-tures. Our results are robust to different political institutional quality indicators, ordering of variables in the VAR and different specifications of government spending categories.

An Instrumental Variable Approach to Calculating the Income Elasticity of Demand for Healthcare in Canada.

Canadian health care spending as risen as a percent of GDP almost every year since statistics on the subject were collected. Over this time frame Canadian incomes have also risen significantly as well. Determining whether the cause of these increases is a demand-sided problem as a result of increasing incomes is important as it will provide some legitimacy that Canadians are simply spending more on health care because they are richer. Using data from the Canadian Institute of Health Information we examine whether rising health spending is likely being driven by rising incomes. Using an instrumental variable approach with provincial natural resource wealth as an instrument we demonstrate that health spending is a normal good and income is likely not driving the rise in health spending as a percent of GDP. We compare our results to previous Canadian literature. We also break down spending by category to examine what categories of spending will likely be influenced by rising incomes.