Types Of Public Spending Research Articles

Seyyahların Gözüyle İslam Maliye Tarihi: İbn Cübeyr Seyahatnamesi

This study examines the travel book written by Ibn Jubair in terms of Islamic public finance history. There is an intense interest in Islamic economics today. However, this interest unfortunately only focuses on certain areas such as Islamic finance by neglecting the history of Islamic public finance. Therefore, there is a gap in the literature in terms of Islamic public finance history. To contribute to the filling of this gap, the present study deals with Ibn Jubair's travel book from the perspective of Islamic public finance history. In his book, Ibn Jubair argued the elements that make up public finance, from public revenues to public expenditures and the administration of public finances. Heavy taxes and unfair practices against taxpayers were the subjects that Ibn Jubair strongly criticized. Ibn Jubair, for instance, used definitions of heinous, damned, and iniquitous about customs duties on pilgrims. On the other hand, Ibn Jubair, who also elaborated on the types of public spending, attached great importance to the spending made by foundations and wealthy people in the society for financing public spending. As a result, it is regarded that these resources used in the financing of public spending can also contribute significantly to today’s economy.

Public investment efficiency and sectoral economic growth in Pakistan

AbstractMotivationThe issue of the effect of public investment on private investment and consequently on growth is much debated in economic literature. On the one hand the classical school believes that increment in public spending reduces economic growth by crowding out private investment, whereas Keynesians, on the other hand, consider government spending a key variable for economic growth.PurposeLike other developing economies Pakistan is also facing a high budget deficit which curtails public spending. This study estimates the relative effects of public investment in physical (infrastructure and energy) and social (health and education) sectors on output by estimating long term marginal productivity.Approach and MethodsThis study used the vector autoregressive/vector error correction model (VAR/VECM) technique to measure the effect of public investment on output, private investment and employment; separate VAR models are estimated for each sector and each type of public spending. Further, in order to attain these uncorrelated residuals, Cholesky decomposition is used and the resulting accumulated impulse response measures the cumulative response of all variables due to change in policy variable i.e. public investment.FindingsThis study indicates that public investments have a crowding in effect in 49 cases, while in 21 cases there is crowding out, 34 cases indicate labour absorption effect, while 36 cases show labour substitutions and 52 cases show a positive output effect, while in 18 cases output effects are negative. Overall, these results indicate that all types of public investments are growth stimulating through both crowding‐in and labour absorption effects.Policy ImplicationsThe overwhelming results illuminate that public investment had attracted private investment in Pakistan in the past and therefore to attract private investment in future, the government of Pakistan should increase public investment. This lesson can also be substantiated from the experience of several developing countries, particularly India. In India, the last 20 years have seen very high public investment despite high fiscal deficit, which has led to very high economic growth.

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.

Public Spending, Quality of Bureaucracy and Economic Growth: A Theoretical Analysis

This paper develops a theoretical framework to investigate the relationship between public spending and economic growth, where public spending provides both productive capital and unproductive services. We take into account the quality of bureaucracy with the possibility of rent-seeking motives. A key feature of the model is that it distinguishes between utility enhancing and productivity enhancing public spending. In the absence of rent-seeking motives, the paper demonstrates that public spending will promote economic growth only if marginal productivity of spending is high enough to offset the potential output loss due to increased taxation. In the presence of rent-seeking, however, the impact of public spending on economic growth depends on the quality of bureaucracy and how the latter impinges upon the rentseeking behaviour. The analysis shows that while improvement in bureaucratic quality would unambiguously raise the share of utility enhancing public spending, its impact on economic growth would depend on how bureaucratic quality influences the relative magnitudes of the two types of public spending as well as on how far bureaucratic extraction will be controlled as a result of improvement in bureaucratic quality. Bureaucratic extraction is likely to be minimised with strong institutions and effective monitoring and accountability mechanisms thereby improving the prospects of economic growth. JEL Classification: C61, D23, D61, D73, H50 Keywords: Rent-seeking, Quality of Bureaucracy, Public Goods, Public Expenditures

Governmental interventionism degree in economy - a case study in OECD countries

In this study, we talk about the economic role of the state, and we analyze the degree of its intervention in the economy within the OECD countries, for the period 2000-2016. Thus, we seek to identify the countries characterized by an active intervention as well as a weaker level of state intervention. Then, we show the types of public spending that the state places more emphasis on. We analyze the distribution of state intervention (given by budget revenues) concerning to GDP, fiscal pressure, the period before and after the 2008 crises and certain types of expenditure. We can say that, generally, well-developed countries are characterized by a high level of state interventionism, while less developed ones by lower interventionism. The degree of interventionism level is smaller after the 2008 crises.

Public expenditure in time of crisis: are Italian policymakers choosing the right mix?

In the ‘austerity debate’ a crucial issue is the composition of fiscal adjustment. This article provides empirical evidence on the relationship between economic crisis episodes and composition of public expenditure by examining the impact of economic crises on the share of different types of public spending in total public expenditure in the Italian regions. Our results suggest that fiscal consolidation strategies have not had growth-friendly expenditure composition. The crisis aggravated budgetary trade-offs by reducing the share of discretionary spending such as public investments.

Educate or Adjudicate? Socioeconomic Heterogeneity and Welfare

I present a formal framework to explore the welfare and distributional effects of a government’s optimal choice over two types of public spending in a closed economy: domestic security (DS) and investment in social capital (SC). Production is characterized as a function of social and physical capital stocks that both vary across the regions. DS stands for total factor productivity, while SC stands for human capital and civic cooperativeness combined. SC accumulates via public spending on universal primary education, cultural, and civic events and such, and is exposed to regional spillover effects. Numerical simulations of the static solution of the government’s welfare maximization problem reveal that the optimal rate of spending on SC (m*) is negatively related with the income share of physical capital, SC spillovers and fiscal decentralization. Simulations also show that SC homogeneity is positively associated with both the level and equitability of aggregate income. The maximum attainable levels of income, welfare and social cohesion and the most equitable incomes are all observed to realize at some intermediate range of m* values. In case DS augments SC, however, social cohesion improves and welfare declines monotonously in m*.

Public Investments in and for Agriculture

Within a policy environment of greater attention to agriculture following the food price crises in developing countries, this Special Issue is motivated by the importance of bringing to bear new conceptual and empirical research on the determinants, trends and consequences of public expenditures in support of the agricultural sector of developing economies. This introductory article lays the groundwork by first conceptually articulating the rationale for agricultural public investments. The articles in this Special Issue add to past literature in three main ways. First, careful analysis of newly compiled data provides new information on the patterns of agricultural public expenditures across developing regions. Second, the papers provide new insights on the cross-sectoral effects of different types of public spending and their complementarities and substitutability. And third, venturing into the examination of the political economy determinants of agricultural public expenditures opens the door to an important area of sparse research.

Institutions, Preferences and Public Policies: The Case of Voting Systems and Redistribution

Institutions are the rules of the game, generating certain incentives for agents who adapt their behavior accordingly. The electoral system is the institution that transforms individual preferences into collective decisions, but the way in which it performs this function differs. Such differences may result in different collective decisions even when individual preferences are similar. The relation between voting rules and redistribution provides an illustration for this phenomenon. Even when accounting for various country characteristics and social preferences, proportional systems seem to spend more on redistribution. The explanation lies in the different incentives created by the voting rules, namely the size of electoral districts and the type of public spending they encourage.

Oil shocks and oil producers' growth: where did all the spending go?

I use panel unit root tests and panel error correction models to examine the effects of oil windfall shocks and types of public spending on economic performance in 16 oil-producing countries over the period 1972–2008. Higher oil prices seem to reduce non-oil growth in the long run, but stimulate it in the short run. However, oil abundance may or may not become a ‘curse’ conditional on how the windfalls are managed. I find that the large windfalls of the 1970s and the 2000s have contributed to the slow long-run growth performance, after controlling for the composition of public spending. Public sector wages stimulated long-run non-oil growth in more oil-abundant economies; but had a negative effect in less oil-endowed countries. The large public investment programs were not effective in stimulating non-oil long-run growth; and the higher the dependency on oil, the lesser the contribution of new infrastructure investments to the non-oil sector's growth.

IS THERE A FISCAL FREE LUNCH IN A LIQUIDITY TRAP?

This paper uses a DSGE model to examine the eects of an expansion in government spending in a liquidity trap. The spending multiplier can be much larger than in the normal situation if the liquidity trap is very persistent, and stimulus can be rapidly implemented. Moreover, the budgetary costs may be minimal as the large response of output boosts tax revenues, allowing for something close to a …scal free lunch. However, we caution that the multiplier may be much smaller under plausible implementation lags for many types of public spending,and/or if the liquidity trap lasts less than two years. In addition, because the marginal impact of expansion decreases in the scale of the outlay, it is crucial to distinguish between average and marginal multipliers.

Inequity in American Schools: A New Perspective on the Distributional Effects of School Expenditures on Economic Well‐Being

This article explores how inequities in public K‐12 school spending impact the distribution of economic well‐being across American households with public school students in 1989 and 2000. Adapting concepts from the public finance literature, I explore the impact of school spending on the vertical and horizontal equity and its impact relative to other types of public spending on social programs and taxation. Conventionally, vertical equity refers to the size of the income gaps between households. Horizontal equity refers to the ranking of households along the income distribution with any change in ranks producing horizontal inequity. My main findings show that school spending, when converted into a component of income, served to reduce extended‐income inequality through improvements in vertical equity without the discriminatory implications of exacerbating horizontal inequity across households. Additionally, this impact was at least as large as that of spending on other social programs. This finding bolsters standard arguments for equity and progressivity of school finance across students.

Consumption multipliers of different types of public spending: a structural vector error correction analysis for the UK

The aim of this paper is to investigate the relationship between government spending and private consumption in the UK, for which there is scarce previous empirical evidence. We disaggregate public expenditure into three categories and search for the corresponding private consumption multipliers. Our analysis is based on the estimation of a structural vector error correction model with quarterly non-interpolated data for the period 1981:1–2007:4. Initially, we estimate negative but barely significant effects on consumption of shocks to total public spending. Then, using the public spending breaking down, we find that while shocks to public wages crowd-out private consumption as predicted by neoclassical models, shocks to the non-systematic component of social spending and government purchases of goods and services generate a positive reaction, so to crowd-in private consumption. Thus, the qualitative and quantitative dimensions of fiscal multipliers on private consumption change across different public spending categories. Our findings suggest that any empirical support of competing theoretical models on the issue would benefit from a disaggregation of government expenditure, rather than focusing on the aggregate measure.

Guns, highways and economic growth in the United States

Given its significant policy implications, the nexus between public expenditures and economic growth has been the subject of an extensive and often emotive theoretical and empirical debate. The nexus between two types of public expenditures and economic growth is examined in this paper using both linear and nonlinear causality tests. Both spending on highways and on defence are regarded, albeit with not the same intensity of conviction, as useful counter-cyclical policy instruments and as stimuli to economic growth. Findings reported herein from both linear and non-linear causality tests offer evidence in support for the growth enhancing properties of the former type of public spending but not so in the case of military expenditure.

Fiscal austerity and the trade-off between public investment and social spending

This article makes two claims: first, it argues that the impact of fiscal austerity varies across different types of public spending. In particular, we show that discretionary spending (public investment) is hit harder by fiscal austerity than entitlement spending (public spending on pensions and unemployment) because of different institutional and political constraints. Second, we find that electoral institutions affect how governments solve this trade-off. Discretionary spending is cut back more severely in countries with an electoral system based on proportional representation than in a majoritarian system. Our empirical analysis relies on a methodological approach (composite data analysis) that takes into account interdependencies between budgetary categories. Using data for 21 Organisation for Economic Co-operation and Development countries from 1979 to 2003, we find strong evidence for the varying impact of fiscal stress on the budget shares of discretionary and entitlement spending as well as strong interactive effect between fiscal austerity and electoral institutions.

How Does the Composition of Public Spending Matter? A Framework Relating Public Spending to Growth, Equity and Poverty-Reduction Objectives

Public spending has effects on growth and distribution which are complex to trace and difficult to quantify. But the composition of public expenditure has become the key instrument by which development agencies seek to promote economic development. In recent years, the development assistance to heavily indebted poor countries (HIPCs) has been made conditional on increased expenditure on categories that are thought to be “pro-poor”. The recent decision by the G-8 to expand debt relief and to increase aid volumes is likely to increase the pressures to allocate resources to particular sectors and functions with a view to promoting growth or reducing poverty. This paper investigates the conceptual foundations and the empirical basis for the belief that poverty can be reduced through targeted public spending. While it is widely accepted that growth and redistribution are important sources of reduction in absolute poverty, a review of the literature confirms the lack of an appropriate theoretical framework for assessing the impact of public spending on growth as well as poverty. The dangers of policy decisions that are not well-grounded in theory are self-evident and the paper points to the need to address this weakness. Building on a review of recent approaches that begin to address this gap, it proposes a framework that has its foundation in a broadly articulated country development strategy and its economic goals such as growth, equity, and poverty reduction. Combining principles of public economics and endogenous growth theory offers one way to develop appropriate guidance for public expenditure policy. Public economics principles help to clarify the roles of the private and public sectors and to recognize the complementarity of spending, taxation, and regulatory instruments available to affect public policy. With regard to the impact of any given type of public spending, policy recommendations must be tailored to countries and be based on empirical analysis that takes account of the lags and leads in their effects on equity and growth and ultimately on poverty. The paper sketches out such a framework as the first step in what will have to be a longer-term research agenda to provide theoretically and empirically robust and verifiable guidance to public spending policy.

Can states buy peace? Social welfare spending and civil conflicts

This study examines whether the state’s ability to provide social welfare services has any major effect on the probability of civil conflict onset. We argue that welfare spending contributes to sustaining peace because the provision of social services reduces grievances by offsetting the effects of poverty and inequality in society. Welfare spending serves as an indication of the commitment of the government to social services and reflects its priorities and dedication to citizens. By enacting welfare policies that improve the living standards of citizens, governments can co-opt the political opposition and decrease the incentives for organizing a rebellion. Utilizing time-series, cross-national data for the 1975–2005 period, the results indicate that as the level of the government investment in welfare policies (i.e. education, health, and social security) increases, the likelihood of civil conflict onset declines significantly, controlling for several other covariates of internal conflict. Additional data analysis shows that general public spending and military expenditures are unlikely to increase or decrease the probability of civil unrest. Overall, these findings suggest that certain types of public spending, such as welfare spending, might have a strong pacifying effect on civil conflict, and therefore the state’s welfare efforts are vital for the maintenance of peace.

Impacts of agricultural public spending on Chinese food economy

PurposeThe purpose of this paper is to develop a dynamic computable general equilibrium (DCGE) model to analyze economy‐wide impacts of different types of public spending in China. A particular focus is placed on their impacts on food economy.Design/methodology/approachIn this paper, DCGE model is developed to analyze economy‐wide impacts of different types of public spending in China. The effects of increased agricultural subsidies, agricultural R&D, and irrigation are simulated by using China DCGE model.FindingsThe results show that public spending has significant impact on food production, price, and trade. The increased public spending on agricultural R&D, irrigation, and agricultural subsidy also has modest impacts on other sectors such as industry, service, and GDP growth.Originality/valueThe paper constructs the China dynamic CGE model and analyzes economy‐wide impacts of different types of public spending in China, especially for the food economy.

The Bang for the Birr: Public Expenditures and Rural Welfare in Ethiopia

This article explores the impact of different types of public spending on rural household welfare in Ethiopia. The analysis reveals that public spending on road infrastructure is characterised by relatively high, but regionally strongly concentrated, returns in terms of rural household welfare. This is quite in contrast to the returns to public expenditures in education, which have attributes of much wider reach but less intensity. Public investments in agriculture show results that are low in magnitude and in statistical significance, mostly due to a poor link between public expenditures in agriculture and productivity in the sector.

Consumption Multipliers of Different Types of Public Spending: A Structural Vector Error Correction Analysis for the UK

The aim of this paper is to investigate the relationship between government spending and private consumption in the UK, for which there is scarce previous empirical evidence. We disaggregate public expenditure into three categories and search for the corresponding private consumption multipliers. Our analysis includes the estimation of a structural vector error correction (SVEC) model, using quarterly non-interpolated data for the period 1981:1 – 2007:4. Initially, we estimate negative effects on consumption of shocks to total public spending. Then, using the spending decomposition, we find that while shocks to public wages crowd-out private consumption as predicted by neoclassical models, shocks to the non-systematic component of social spending and government purchases of goods and services generate a positive reaction, so to crowd-in private consumption. Thus, the qualitative and quantitative dimensions of fiscal multipliers on private consumption change across different public spending categories. Our findings suggest that any empirical support of competing theoretical models on the issue would benefit from a disaggregation of government expenditure, rather than focusing on the aggregate measure.