The size of government

Most research on the causes of growth in government expenditure has focused on the demand for government services. In this paper, we argue that in fact this growth may have occurred because of changes in supply. Changes in technology leading to increased specialization and thus increased opportunity costs of self-production have led to increased market production and increased record keeping. Also, female labor force participation has increased. Both of these factors serve to reduce the (efficiency) cost of collecting taxes; if the demand for government spending has not changed, this increase in supply would lead to a larger public sector. We estimate a system of simultaneous equations for the period 1929–1970 incorporating this hypothesis, and the results are consistent with the theory. We are able to explain virtually all of the growth of government; increases in female labor force participation seems to be a very important variable in this explanation.     

Fiscal Policy Composition,Public Debt,and Economic Activity

This paper uses a dynamic general equilibrium model i) toinvestigate how changes to different spending and revenue items of the budgetaffect economic activity and public finance; and ii) to evaluate thewelfare costs of alternative fiscal policy maneuvers. The paper shows that,unlike an increase in government purchases of final goods, an increasein public employment and transfers can have a contractionary effect onthe economy in the same way as a rise in tax rates. It also suggests thatfiscal adjustments implemented by cutting spending items increasehouseholds' welfare and are more effective in reducing the primary deficitand public debt than are increases in tax rates.     

The scissors crisis in public finance

The late 1970s saw the beginnings of a “scissors crisis” in public finance, i.e., a growing divergence between the expansion of government revenues and the increase in government expenditures. Unless strong measures are taken, the 1980s threaten to become the age of mega-deficits. The sluggish growth of public receipts and the buoyant development of public outlays are linked to a number of structural tendencies in the economies of the industrialized world. Efforts to close the gap have included both tax increases and expenditure cuts, but as more and more governments gain experience with the phenomenon of “fiscal cannibalism,” i.e., that taxes eat up each other, the main thrust of the counter-offensive has come to be directed against the growth of public spending. Current strategies to reinforce expenditures control include such elements as global norms, new indexing techniques, new methods of decentralizing hard choices, better methods of cash management, well-balanced policy packages, and incentives especially designed to stimulate cutbacks and policy termination.     

Community Development Block Grant Spending Revisited: Patterns of Benefit and Program Institutionalization

This article analyzes Community Development Block Grant (CDBG)spending by local governments between 1988–1992. We addressfour issues examining actual expenditure patterns in a smallcentral city and five satellite cities in Michigan: changesin CDBG expenditure patterns; levels of social targeting; theextent of institutionalization of expenditure patterns; andthe level of privatization of CDBG spending. We conclude thatwhile spending for housing and public works is related to thefiscal health of cities, expenditures for economic developmentand social services are related to political characteristics.Further, local governments exceed federal social targeting guidelines.Finally, while there is little privatization, the communitiesstudied evidence modest levels of program innovation in thelater years of the CDBG program.     

The Tax Revolt and Electoral Competition

This paper explores the effect of electoral competition onstate and local expenditures in the US during the politicalenvironment following the tax revolt of the late 1970s. Itutilizes a theoretical model in which both electoralcompetition and tax and expenditure limits impact spending.Empirical results indicate the tax revolt's primary impact wastransmitted through political candidate competition, notthrough the adoption of tax or expenditure limitations, as iscommonly believed. However, tax and expenditure limits doaffect public education expenditures.     

社会福利指数、政府支出规模及其结构优化

政府支出规模及其结构优化应以提高社会福利水平而不是以经济增长为其最终目标。构建了政府支出与消费、社会福利之间的理论分析模型,利用优化控制理论与方法,从理论上论证了在最大社会福利的基础上存在最优政府支出规模与支出结构安排,设计了衡量社会福利水平的新指标,并以此指标为基础,利用中国1982年—2005年的年度数据,对政府支出规模及其结构优化进行计量分析。其基本结论是:我国政府支出规模及其各种单项支出与社会福利指数之间存在较强的相关性,为满足我国不断增加的公共服务需求,应增加政府支出规模,优化政府支出的内部结构体系,即适度提高中央政府支出在政府总支出中所占的比重,减少投资性支出和行政管理支出,增加以教育、公共卫生、公共安全、社会保障为主体的公共服务性支出,以促进我国社会福利水平的提高。     

Government spending cycles: Ideological or opportunistic?

This paper examines whether partisan and opportunistic motives affect government expenditure growth in the Netherlands. The time series analysis, covering the period 1953–1993, allows for different types of government spending. In general, spending is inspired by ideological and opportunistic motives: all government expenditure categories show an upward drift during election times and the ‘partisan’ motives behind government spending are clearly revealed: left-wing cabinets attach greater importance to social security and health care than right-wing cabinets and right-wing cabinets value expenditure on infrastructure and defense more than left-wing parties.     

The participation of women in urban labor markets in Mexico: 1970-1980

This article analyzes the presence of women in urban labor markets in Mexico during the 1970s in terms of the regional location of the city and the type and diversity of employment opportunities for women. 49 cities with over 100,000 inhabitants in 1980 were grouped into 3 regions, the relatively urban and industrial north, the heterogeneous center, and the less developed south. Census data for 1970 and 1980 on male and female labor force participation in the municipios containing the 49 cities were analyzed to assess urban labor markets. The cities were grouped according to whether they had higher or lower than average rates of labor force participation in the 2 study years. The cities of the north included the greatest relative number of cases of low female and male labor force participation in 1970 and 1980 and a declining trend for the 1970s. Cities of the center had the highest levels of male and female labor force participation in both 1970 and 1980 and showed a trend toward increasing female participation in the 1970s. Cities in the south were in an intermediate position, but during the 1970s a high percentage showed a trend toward increase in male participation and decrease in female participation. Typologies of the cities were then constructed based on female age specific participation rates and female occupational distribution. Urban areas with high rates of participation among young women aged 15-24 years were distinguished from those with high participation rates for younger and older women, and those with less diversified employment opportunities for women were distinguished from those with more diversity. Female participation presented marked variations between regions. In general, women participated to a greater degree in diversified labor markets that absorbed workers of different ages and degrees of qualification. There were not necessarily more female workers in cities that were more dynamic in terms of economy and male participation. Cities of 100,000 or more inhabitants in the center were characterized by a high proportion of women of different ages in the labor market. Cities in the north had lower average levels of female participation although those on the northern border had a high participation of young women in manufactures and assembly. Southern cities employed women in manual occupations, especially in commerce and services. Primarily adolescents under 15 and women over 25 were employed. Apart from the regional variations there were variations in female employment within regions. An annex discusses the study methodology in greater detail.     

Good Cuts,Bad Cuts: The Need for Expenditure Analysis in Decremental Budgeting*

Quantitative targets are widely used in decremental budgeting. On the macro-level, governments set global limits for the growth of public expenditures, government deficits, or the ratio of government spending to GNP. On the micro-level, reduction targets are frequently assigned to spending ministries or agencies on a selective basis or across-the-board. While this kind of targetry appears to be indispensable to achieve cutbacks, it is also very deficient in that it treats public expenditures as a fungible commodity, consisting of interchangeable units of account. As austerity policies are coming of age, the inherent weaknesses in the targets approach attract increasing attention, and there is growing concern about the quality of austerity measures. To make sound decisions on such measures, governments must develop a better understanding of the characteristics and properties of various public expenditures. This paper outlines four varieties of expenditure analysis that may contribute to ‘the leap from quantity to quality’ in decremental budgeting.     

Social mobility and the demand for public consumption expenditures

The collective choice of public consumption expenditure is reconsidered when voters are socially mobile. In accordance with previous work on social mobility and political economics, the analysis concerns a class of mobility processes that induce mappings from initial income to expected future income that are monotonically increasing and concave. The paper abstracts from the explicitly redistributive role of government and concentrates on public consumption which is modeled as a classical public good. In equilibrium, provision is sensitive to the degree of social mobility, theoretically linking social mobility to public consumption. Further, empirical puzzles about the impact of voting franchise extensions on the growth of government spending are addressed within the context of social mobility.     

Efficiency of subnational government expenditure towards elementary education and nutrition: Bootstrap data envelopment analysis for India

The need of translating increasing outlays into better outcomes on various public programmes has attracted the attention of researchers worldwide to focus more on the quality of public spending, often assessed in terms of its efficiency. The present article is a contribution to the existing literature on the subject in that it assesses the efficiency of government expenditure of Indian states for two most basic social services—elementary education and nutrition during 2014–2015 and 2018–2019 using data envelopment analysis and Malmquist productivity index techniques, in both input-oriented as well as output-oriented settings under variable returns to scale assumption; it constructs the average performance index for children at elementary education and malnutrition index for women and children to utilise them as output indicators; and it adopts a robust bootstrap truncated regression procedure to avoid various econometric issues while estimating the impact of selected environmental factors on bias-corrected inefficiency scores. The major findings of this article seem to suggest that, while states should be provided greater flexibility in their fiscal operations, they have to complement their fiscal autonomy with good governance to improve the efficiency of their spending on basic social services. Towards this end, states like Bihar, Jharkhand and those belonging to North-Eastern and Himalayan regions need special attention with a different set of development policies.     

Public spending interactions and local politics. Empirical evidence from French municipalities

This paper aims at testing whether there exist spending interactions between French municipalities by estimating a dynamic panel data model. Our results suggest that there are some interactions between neighbouring municipalities as regards primary and investment expenditures. A positive relationship between municipalities’ wage bill and unemployment rates is likely to stress a rise of temporary employment in those municipalities that suffer from social troubles. Further, the estimation results show that these interdependences also exist between cities whose mayors have the same partisan affiliation. Finally, our results confirm the opportunistic behaviour of local governments, which increase all categories of public spending in pre-electoral periods     

Government Finances In Declining Central Cities

The relationship between population decline and changes in therevenue and expenditure patterns of 318 U. S. central citiesduring the 1970s are examined using both static and dynamicmodels. Declining cities experienced less growth in revenues,especially own-source revenues than growing cities. Decliningcities became more dependent upon other governments for fiscalrelief. But declining central cities were more successful atreducing the rate of growth in their expenditures. Populatindecline was not found to have any significant independent impacton changes in municipal taxing and spending levels. A city'sage was the most important predictor of fiscal change.     

Road to Ruin? A Spatial Analysis of State Highway Spending

Do states engage in infrastructure expenditure competition to attract new economic activity? Economic theory is inconclusive on the matter. States might respond to increased infrastructure spending in competitor states by increasing their own infrastructure spending. Conversely, states may decrease spending in the presence of positive spillovers from competitor states' infrastructure investment. Using spatial econometric techniques and focusing specifically on highway spending, we demonstrate that states expend less on highways when spending in neighboring states increases. We explore this possibility further by modeling state personal income growth as a function of own‐state and neighbor‐state highway spending. Our findings suggest positive spillovers influence interstate relationships for highway spending rather than race‐to‐the‐top competition for economic activity.     

The Gnomes of Washington: Four Myths of the 1976 IMF Crisis

The IMF settlement of December 1976 looms large in popular and partisan views of the politics of the 1970s. It is argued here that conventional academic wisdom has come to embody several misleading myths about its impact on economic policy. Evidence is presented to challenge four such myths which suggest that the IMF forced the Labour government to launch an attack on public spending, introduce cash limits to control public spending, introduce monetary targets and abandon the pursuit of full employment through demand management.
Although the language of the [IMF] negotiations reflected the arcane terms of international finance… the decisions required of the British Government were profoundly political… behind the technical financial decisions lay fundamental differences over the appropriate balance between the private and public sectors, the priority between capital accumulation and social welfare, the relative weight to be given to incentives and equality… What was at issue was the future shape of the political economy of Great Britain.¹     

The evolution of employment in Mexico: 1895-1980

Employment figures from the Mexican national census are the basis for this analysis of employment changes in Mexico between 1895-1980. The work identifies longterm trends in the volume and composition of employment and distinguishes 3 main periods in the evolution of employment. The first period, from 1895-1930, marked the end of a stage of development lasting until about 1907 in which sufficient internal stability was achieved to support Mexico's entrance into the world market. Export of agricultural products and metals was the principal focus of economic growth. Construction of roads and railroads was a central element of progress. But economic and social problems manifested in regional disparities, concentration of wealth, conflicts between economic sectors, low pay for agricultural workers, and fierce social and political control characterized the period and culminated in the Mexican Revolution. After the first decade of the 20th century the ability of the economy to absorb new workers began to decline, and the falling of crude activity rates was not reversed until the 1940s. During the 1920s, total employment increased less than 6%, reflecting a net increase of 403,000 male workers and a decrease of 110,000 female workers. The second major period of employment from 1930-1970 saw the change from an economy based on export of primary products to one based on manufacturing for the internal market. There were 2 subperiods, a stage of transition from 1930-50, the economy registered marked fluctuations, but by the 1940s the consolidation of state power and important reforms permitting expansion of the internal market were factors in an accelerated growth of employment relative to the preceding intercensal period. Despite considerable increases in agricultural employment, the relative share of the agricultural sector in total employment was beginning a decline. Employment registered the highest growth rates of the century in the 1940s and exceeded population growth. The increased employment was explained by accelerated growth and accumulation in manufacturing along with increases in commerce, services, construction, and agriculture. From 1950-70, industrial development was consolidated, and there was a generalized expansion in employment in manufacturing as well as in the secondary and tertiary sectors. The economy was less able to absorb new labor, primarily because the agricultural sector had reached the limits of expansion in both the commercial and peasant sector by 1965, at just the time that population growth was most rapid. During the 1970s, manufacturing employment grew less rapidly because of modernization, almost exclusive orientation to the internal market which limited expansion, and scarcity of funds for importing capital goods. A new model of growth will be needed if Mexico is to escape its present stagnation, and a significant share of economic activity will need to be oriented to export. Until this process is consolidated, the national economy is unlikely to show signs of sustained recuperation.     

Recent Trends in U.S. Income and Expenditure Poverty

After many years of following similar trends, U.S. poverty rates measured by household spending in data from the U.S. Consumer Expenditure Survey (CE) fell between 2000 and 2008, while poverty measured by income rose. Comparisons of spending and income poverty in the CE with income poverty in other surveys, spending data from the Panel Study of Income Dynamics, and a time series of employment levels, find the CE to be the outlier. The findings do not bear directly on the primary use of CE data in providing category weights for calculation of the Consumer Price Index, but do require explanation not available in CE public‐use files.     

What Stabilizes State General Fund Expenditures in Downturn Years—Budget Stabilization Fund or General Fund Unreserved Undesignated Balance?

This article strictly defines the budget stabilization fund (BSF) as a counter-cyclical reserve, and with a panel data set examines the effects of BSF and general fund unreserved undesignated balances (UUB) on stabilizing state general fund expenditure during downturns. The article finds that BSFs bolster spending in lean years: each percentage point increase of BSF balance as a percent of general fund expenditure can minimize negative expenditure gap by a quarter percentage point. But the article does not find evidence that UUB is a counter-cyclical fiscal tool, indicating that wide adoption of BSF may have changed the nature and use of UUB.     

Labour market regulation and subjective well-being in low-income countries

A growing literature suggests social democratic policies, as exemplified by the welfare state and active labour market policies, promote higher levels of life satisfaction compared to the neoliberal agenda of austerity, smaller government and more ‘flexible’ labour markets. In this article, this inquiry is extended to low-income countries. A theoretical argument is developed for why labour market regulation (LMR) (rather than social welfare spending or the general size of government) is a more appropriate locus of attention outside of the industrial democracies. The relationship between LMR and several measures of well-being is then empirically evaluated, finding robust evidence that people live more satisfying lives in countries that more stringently regulate their labour market. Moreover, it is found that positive benefits of LMR on well-being are the largest among individuals with lower incomes. The implications for public policy and the study of human well-being are discussed.     

财政分权与地方政府行政管理支出——基于中国省级面板数据的实证研究

行政管理支出具有双重属性:过多的支出不利于经济增长,使地方政府在竞争中处于劣势而不利于官员的晋升,同时有违中央政府的宏观政策目标;但能直接提高地方政府官员个人的福利水平。所以,地方政府及官员对行政管理支出存在两难选择。本文利用我国30个省(自治区、直辖市)1998—2006年的面板数据对财政分权与行政管理支出的关系进行实证研究和稳健性检验。主要结论是:在中国特色财政分权的制度环境下,地方政府在财政支出自由裁量权扩大时,总体效应是加大了行政管理支出的规模。同时,行政人员规模与行政管理支出存在显著的正相关关系。地区经济发展水平、资源禀赋、社会结构等因素对行政管理支出也有显著性的影响。在公共财政体制改革的背景下,其他公共财政支出项目(社会保障支出除外)对行政管理支出存在显著的"挤出"效应。