Public expenditures

The second research question (RQ2), whether similarities in local public expenditure by function in EU countries are connected with identical number of lower levels of government and the extent of fiscal decentralization of expenditures, was confirmed only partially (Table IV). The study is also supported by the research carried out by Oplonik and Finžgar (2013), who evaluate local public expenditures by function in 27 EU countries, indicators of fiscal decentralization and mutual relation between fiscal decentralization of expenditures and the number of lower levels of government. Their the results of the analysis have shown that there are significant differences between EU−27 countries, both in terms of the number of lower levels of government as in terms of the fiscal power and autonomy of financing. The countries compared thus have from one (municipalities) and all the way up to three levels of local self−government (municipalities, provinces, regions and federal states, etc.). The scope of funds they allocate to local issues is also significantly different from country to country. As Aristovnik argues (2012), few empirical surveys have measured the impact of fiscal decentralization on the size of the public sector in EECs. Whether fiscal decentralization leads to a reduction or an increase in the size of the public sector is a well−researched question within the field of fiscal federalism. On one hand, Oates (1999) and Rodden (2003) find that decentralization generally has a negative impact on the growth of governments. For instance, Ebel and Yilmaz (2002) find that subnational tax autonomy has a negative and significant impact on public sector size in ten transition countries for the 1997−1999 period. On the other hand, e.g. Jin and Zou (2002) conclude that fiscal decentralization leads to an expansion of the public sector and that fiscal autonomy leads to ‘smaller states’ while grants have a positive impact on public sector size. Cassette and Paty (2010) show that in the long run, tax autonomy reduces central expenditure but increases and to a greater extent size of public sector (sub−national public expenditure as % of GDP), leading to higher aggregate public expenditure. Authors also show that vertical imbalances tend to increase the sizes of public sector (sub−national, national and aggregate governments).

This paper has extended the Barro (1990) model with single aggregate government spending and one flat income tax to include public expenditures and taxes by multiple levels of government. We have derived the rate of endogenous growth under quite general specifications of preferences and production technology. With simulations, we have examined how the rate of endogenous growth changes with respect to federal income tax, local income tax, and federal transfer. We have also discussed growth-maximizing choices of income taxes and federal transfer. In addition, we extend our model to a more general framework including a local consumption tax and local property tax. A preliminary simulation analysis has shown that the local property tax has the largest negative impact on the rate of economic growth, whereas a local consumption tax is always growth enhancing. This finding contrasts with that of Rebelo (1991), who shows that a consumption tax has no effect on the growth rate.

The existence of spatial strategic interaction between neighbouring local governments is often referred in literature and identified in empirical applications for several countries. This interaction can occur either in expenditures or revenues of local governments. The spatial interaction in local government expenditure finds support on three theoretical explanations: spillover effects, Tiebout competition or mimicking behaviour. Identify the adequate explanation for the local government interaction is not an easy task since the reduced form of the estimated model can generate indistinguishable pattern in spatial interactions. This paper seeks to identify between those theoretical explanations what is the underlying reason for spatial interaction in public expenditures among local governments for the case of a particular sub-area of Portugal. Using differentiated model configurations and the local government expenditures of the municipalities composing the Northern Portuguese mainland, between 1998 and 2008, the paper identifies the structural model that generates the observed spatial auto- correlation in local public expenditures. Among the various theoretical reasons, only the existence of spillovers effects finds support.

The absence of Keynesian effect of the public expenditure raises the issue of the effectiveness of these expenditures and advocates for a sound and rigorous management of public finances. But it would be inappropriate to reduce drasti- cally the current level of public expenditure. Indeed, public expenditures remain vital for the financing of the economy and the fight against poverty. What the results seem to suggest is the change of the current composition of public ex- penditures. Indeed, the main lesson of this study is that public expenditures tend to support growth when they are prioritized for investment, but are also likely to slow it down when privilege is given to consumption. So it is advisable, in the light of the results, to decrease the consumption in favour of investment. The mitigated impact of public investment on growth raises concerns about the ef- fective destination of the expenditure engaged by government. Either the public investments were used to finance not very productive projects in terms of con- tribution to the economic growth or they were diverted from their initial desti- nation. This reality raises in either case the issue of good governance of produc- tive resources.

A linear increase in consumption of medicinal products in Slovenia during the recent years has been determined by a continuous increase medicinal products treatment of an aging population, an increased detection of chronic diseases and complex therapeutic guidelines [5]. In Slovenia there has been prescribing the number of new, substantially more expensive medicinal products for a similar or an entirely new medical indication. Like in other developed countries, the Slovenian population is more and more informed about medical patients’ treatments. Therefore, this has demanded more public funds for consumption of medicinal products, which have been prescribed by the medical doctors on outpatient prescription (Rp). Those reasons have been leading to a rising the public expenditures for medicinal products in the recent years in Slovenia. At the same time they have caused a debate about the economic efficiency of the public health system. Therefore, the spending of the public funds and the price regulation system for medicinal products, they have increasingly been under a scrutiny of government policy. Legislation, regulatory and economic policy measures have been used in Slovenia at aiming to reduce and control public spending on medicinal products.

Blankenau and Simpson (2003), in their empirical study, have examined the effects of the education expenditures that are in public expenditures to economic growth. The level of correlation public expenditures depend on some specific parameters like tax structure and production technologies. In the context of endogenous economic growth, it express the relationship expense-growth with the model that is generated about the effects of private and public investments on human fund depot. In obtained empirical results, it express that the direct positive effects of public-education expenditures decreased on economic growth and even in time it effects negatively overall level of balance by creating a negative impact on other growth determinants. By indicating these results have a meant and education expenditures create uncertainty on economic growth that is at the macro level, it express that this situation would provide determining of the level of public education expenditures to eliminate created uncertainty in appropriate tax policies and these results would contribute to fertile economic growth.

In light of this result, we have asked how public expenditures should be allocated across the educational levels. By using in the ‘growth equation’ the flows of per-student public expenditures at the different school levels, the estimations results point out decreasing marginal returns associated with public expenditures, with respect to the educational level in DCs, which suggests additional resources to be allocated in favour of the lower-schooling stages in this group of countries. Indeed, despite that primary human capital does not -in itself- benefit growth, more resources should be allocated in favour of this schooling level in the DCs, simply because it is a prerequisite for attaining higher educational levels. Additional resources devoted to the primary level should aim to generalise education at this schooling level among the population and improve its quality, which in turn, should be associated with more investment in higher levels of education and faster growth. Unlike the DCs, economic growth rates in the OECD countries seem to benefit from two factors associated with education: low inequality in the initial distribution of education (i.e., advanced human capital stocks were high); and high levels of equality in the allocation of public expenditures across the schooling levels which translate into higher accumulation rates in advanced stages of education.

Equal expenditure per capita across UK regions would typically be considered inequitable, since it would imply a lack of recognition of significant regional differences in “needs” for services and in the costs of provision of public services. A Barnett equilibrium would, for example, only very fortuitously be compatible with the “principle of equalisation”: that, regardless of their location, UK residents should enjoy broadly equal public services. In the UK context it has often been suggested that the regional distribution of public expenditures should ideally be assessed on the basis of a “needs assessment” exercise. This would seek to establish relative needs in different regions of the UK (due for example to different health indicators) and take account of variations in the cost of provision across regions (because of, for example, variations in population dispersion). The only publicly available exercise in the UK relates to 1976-77 and is reported in H M Treasury (1979). Calls for a new “needs assessment” reflect a judgement that Barnett should not ultimately determine the distribution of government expenditures across the regions. Only if “needs” were adequately captured simply by population size would a Barnett equilibrium be compatible with the outcome of a needs assessment (e.g. Twigger, 1998). The consensus appears to be that a needs assessment would indeed validate a Scottish per capita (formula-driven) public expenditure share that is below its current level but is greater than that implied by a Barnett equilibrium. 8 However, without the very detailed research implied by a needs assessment we have no way of evaluating this consensus.

This paper analyzes the effect of corruption on the composition of public expenditures. The theoretical part first derives how a distortion in public spending arises in the context of a two-stage rent-seeking model with endogenous rent-setting that captures both “political cor- ruption” and “bureaucratic corruption”. The model illustrates how the degree of competition within an industry and the difficulty of concealing bribery affect the share of the rent that is obtained by an industry and the willingness of a politician to make resources available to the rent-seeking contest. The empirical investigation is based on a panel dataset for 26 OECD countries covering the time period from 1996 to 2008. The results suggest that with an in- crease in corruption the shares of spending on health and environmental protection increase, while the shares of expenditures on social protection and recreation, culture and religion de- cline. The significance of these distortions is robust to a variety of specifications such as fixed effects, random effects, seemingly unrelated regressions, the inclusion of additional controls, and the use of alternative corruption indicators.

The agricultural sector, like any other sector, needs funding to better contribute to the economic growth. The access to inputs and equipments which is required to foster for the adoption of an intensive production system is highly dependent on the financial resources available. Yet currently, the FAO (1996) pointed out a reduction in agricultural funding these years in developing countries. Therefore, the African Heads of States undertook in 2003 through the Maputo declaration to allocate 10% of public expenditures to agriculture, with the view to help achieve the 6.8% agricultural growth rate assumed necessary to reduce extreme poverty and hunger by half by the 2015 (MDG 1).

Abstract. Avalanches pose a threat to settlements as well as industrial and recreational areas in the Alps. As a counter measure, technical mitigation measures have been imple- mented since the 19th century, resulting in a raise in value of formerly endangered areas. This increase in value can be considered as a benefit due to prevented damage. This paper compares the total costs and benefits of technical mit- igation measures in the municipality of Davos, Switzerland as a basis for evaluating their net social benefit. The bene- fit of avalanche defence structures is determined using two different approaches. First, the replacement value of build- ings protected by mitigation measures is quantified. Second, the number of protected persons is monetarily assessed by means of a human capital approach. The quantified benefit is compared with the present value of cumulative capital ex- penditures on avalanche mitigation measures. In addition, distributional effects of the public expenditures on techni- cal mitigation measures are discussed based on the average future tax revenues within protected areas. Depending on whether benefits are calculated in terms of protected build- ings or protected persons, the results show a large range of cost-benefit ratios. Critical issues of cost-benefit analyses in the context of alpine natural hazards are highlighted, includ- ing problems related to the human capital approach and the sensitivity of results to how benefits are calculated. The ap- plicability of cost-benefit analyses for evaluating avalanche mitigation measures is discussed.

Peacock and Wiseman (1961) findings, which was based on the political theory of public expenditure determination, suggested that governments wishes to spend more money, that citizens do not like to pay taxes, however, governments entitled to pay more attention to the likes of residential with the assumption that a reasonable level of taxation which according to the authors, acts as a restraint on government behavior. Fan et al (2004) stated that government expenditure is not the only way to reduce poverty but government expenditure helps to enhance economic growth and development as a result of efficient utilization of national resources which is the only way to find permanent solution to problems and to stimulate overall satisfaction and welfare of the people and society. Adubi and Obioma (1999), public expenditures almost cover for more than 20 percent of gross domestic product (GDP) in their study of the expenditure management in Nigeria.

This work aims at identifying the public outlays that have been influenced by the growth of Portuguese trade openness since the end of World War II. For the Portuguese reality, it is one of the first attempts to discuss a large set of simultaneously tested control variables. For this purpose, the methodology started from a model that tries to identify the public expenditures to a system of simultaneous macroeconomic forces and, for te- sting, it followed the steps associated with cointegration analysis. Using the most conve- nient techniques, a restrictive set of four expenditures (subsidies, interest payments, other current expenditures, and total public expenditures as a proportion of GDP) was found among the wider set suggested by the Literature. The nature of these expenditures sup- ports the claim that, for the Portuguese case, a particular validity of the compensation hypothesis has been observed. The achieved evidence promotes an important rule: in ad- dition to there being a long-term relation between (some) public expenditures and trade openness, short-term relations may also appear.

In the model of the interaction of local public expenditures, we have to include the various socio-economic and political characteristics of local jurisdictions. The eco- nomic performance of a municipality can influence its expenditures. Unfortunately, we do not have data on the GDP for this level of government, but we could approximate it by the average gross wage. However, this control can bias results due to its correlation with other demographical variables, such as the share of university-educated people, therefore, it is not used. 6 Budget constraint is important for spending, so we include grants and subsidies per capita. We disregard tax revenues per capita as they are poten- tially endogenous. Past liabilities can also influence decisions on public expenditures, so we include the one year lagged indicator of debt service. 7

In   this   paper   we   explore   the   effects   of   fiscal   policies   and   growth   on   measures   of   the   household   welfare   across   the   distribution   of   expenditure   for   two   countries   in   Africa:   Rwanda   and   Tanzania.   We   explore   issues   of   inefficiency   in   government   expenditures   and   dilution   of   growth   benefits   among   the   better   off   sectors   of   the   population   in   these   two   countries   (in   lieu   of   the   poor   sectors)   by   looking   at   the   effects   within   a   country   and   across   different   groups   of   households   and   administrative   entities.   We   exploit   variation   in   expenditures   and   growth   across   and   within   regions   of   each   country   to   estimate   the   elasticities   of   income   with   respect   to   these   expenditures   at   different   points   of   the   expenditure   distribution,   using   household   survey   data   and   government   expenditure   at   the   district   level.   We   find   that   overall,   mean   income   growth   benefits   the   top   income   groups.   The   welfare   spillovers   are   mostly   present   for   top   20%   of   the   income   distribution,   with   the   middle   of   the   distribution   in   Tanzania   responding   slightly   to   these   spillovers.   Social   Public   expenditures   does   not   affect   inequality   in   a   considerable   manner,   but   tend   to   work   towards   decreasing   inequality.   However,   mean   income   growth   is   related   to   ‘increases’   in   inequality   in   the   sense   that   the   richest   sectors   of   the   population   benefit   the   most   from   growth.   We   find   that   the   growth   elasticity   of   income   is   only   above   one   for   the   top   quintile   in   both   countries.   In   Tanzania   a   1%   increase   in   average   household   expenditure   is   related   to   a   1.96%   expenditure   growth   in   the   top   quintile   and   0.43%   in   the   third   quintile.   While   in   Rwanda   it   is   related   to   a   1.93%   increase   in   household   expenditure   in   the   top   20%   of   the   distribution.  

If seen from the graph above, the trend of local government expenditure on education in each area was diverse since 2001 until 2013. However, the trend was quite appreciable as it reflected a growth every year although there were declines in the range of time which were not many. Government expenditures for each regen- cy/city had increased from 2001 to 2013, but in 2005, a very large decrease occurred in Gorontalo Regency. This happened as the local budget in the area fell dramatically by 127.60% or more than 1 times of the pre- vious budget in 2004. Then, in 2007 the ex- penditure on education in that area went down significantly to Rp28.139.833.460 which was several times lower than the edu- cation budget in 2006 that was about Rp138.936.219.930. This situation occurred since the affairs budget merely focused on general government sector, in which the budget on that sector was Rp127.211.238.96, the highest amount in 2006. Meanwhile, oth- er areas showed a fairly steady accrual on the education sector expenditure.

Mevcut literatür göz önünde bulundurulduğunda, kamu harcamaları ile özel tüketim harcamaları arasında uzun dönem ilişkinin olmaması mali politikaların “Keynesyen Olmayan Mali Etkileri[r]

Even though district governments spend the majority of the total education budget, these expenditures are mostly nondiscretionary routine expenditures. Hence, while decentralization formally devolved the responsibilities for education from the central level to the sub-national level, the majority of the development expenditures (closer available to the definition of ‘capital expenditures’ before 2005) is still spent by the central government. Since 2001, the central government has been consistently covering more than 55 percent of total development spending, with districts only covering approximately a quarter. Furthermore, as it is discussed in further detail in section four, subnational governments do not have any discretion over their personnel administration either, due to the mechanism of allocation of the general allocation transfer (DAU). Hence, despite their apparently large participation in the sector, local governments have surprisingly little discretion in managing funds and shaping the key education sector decisions, with the adverse effects of weakening the accountability links of the decentralized system.

In the context, (Koshk 2012) concluded that public sector in Saudi Arabia need develop partnership strategies with the private sector to improve the service provided, and minimize waste of public resources by applying modern approaches in public budget preparation in Saudi. A study conducted by (Eungha 2009) aimed at identifying factors that contribute to public budget imbalance, mainly the expenditures item, and concluded that the agreements made by the government with public and private organizations to implement projects helped produce more realistic numbers in the public budget. A study by (Groech 2009) investigated the effect of increased public expenditures and public debt on public budget balance, found that a rational expenditure on the public budget typically results in growth of national income in case of the government implement public projects that have benefits for the community as a whole, and also improve welfare because such expenditure targets essential services such as education and health. However, expenditure excessive than the amounts allocated on the budget will result in deficits that might continue on the long run, thereby enhancing the cycle of increased public debt.

In our model, a fully-optimal reform requires the government to tax private consumption and adjust its spending to achieve the efficient levels of public investment and public consumption relative to output. The reform may call for the size of government to either shrink or expand, depending on parameter values and the existing level of expenditures in the baseline economy. Consumption tax reforms that deviate from the optimal size of government can result in significant foregone welfare gains. Under some calibrations, maintaining the pre-reform size of government can even produce a net welfare loss. More generally, our results demonstrate that the benefits of shifting to a consumption tax are sensitive to assumptions about the post-reform trajectory of public expenditures and the values of some key parameters that influence the optimal size of government. In our view, this represents an important caveat to previous studies that have ignored the useful nature of public expenditures.