Tests of institutional versus non-institutional models of local public expenditure determination

Are institutional or non-institutional factors more important determinants of local public expenditure decisions? Employing data that allows us to directly identify the entire distribution of voter expenditure demands, we estimate models of deviations of actual expenditures from the expenditure demand of defensible benchmarks — namely, the median voter's expenditure demand and the mean of voters' expenditure demands. Three competing paradigms are employed to specify these models; namely, a non-institutional model, the reform government movement's explanation of how institutions affect local government decisions and a transactions-cost model of this same phenomenon. Predictions from these three competing models differ in many respects. Comparisons of results from estimating models of expenditure deviations are found to be generally more consistent with the non-institutional model than with either of the two institutional models. These results suggest that a competitive local public service market helps limit the ability of governments to tax and spend in excess of the demands of the median or mean voter.     

State and Local Fiscal Sustainability: The Challenges

At the state and local level, fiscal sustainability is the long‐run capability of a government to consistently meet its financial responsibilities. It reflects the adequacy of available revenues to ensure the continued provision of the service and capital levels that the public demands. After examining separate revenue and expenditure trends for state and local governments, this article identifies three specific sets of pressures that affect subnational fiscal sustainability—cyclical, structural, and intergovernmental. It then presents three specific examples of these pressures: Medicaid, pensions and retiree health benefits, and infrastructure. The author asserts that without changes in the fiscal system—in both revenues and expenditures—state and local fiscal sustainability will disappear. It concludes with some potential solutions but argues that the most difficult reform is to ensure that the public understands that there is no such thing as a free lunch.     

City-level analysis of the effect of political regimes on?public good provision

This paper uses U.S. city-level data on five public expenditure categories to test empirically whether the form of local government affects the amount of public good provision. This also serves as an empirical test of a theory of national politics that predicts higher provision of public good in parliamentary than in presidential regimes. The robust results indicate that: at the city level, the mayor-council form of government provides significantly more public good than the council-manager form of government for two of the public expenditure categories; and, at the national level, presidential regimes provide more public good than do parliamentary regimes.     

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 Political Implications of Redefining Public Expenditure in the United Kingdom

This article examines the role, significance and consequences of decisions in the United Kingdom about the definition of public expenditure for planning and control purposes. Three major definitional issues are examined: the narrowing in 1977 of the UK public expenditure definition from a public-sector-wide definition to something much closer to the OECD's 'general government' definition; the treatment of the proceeds of asset sales as negative expenditure; and the introduction in the 1990 white paper of a planning total excluding local government expenditure. Three sets of consequences are examined: the eroding commitment to comprehensive coverage; the resulting policy distortions; and the erosion of conventions traditionally governing the relationships between central and local government. Grounds for unease with present developments are identified, notably the fragmentation of public expenditure documentation and the loss of information, the consequences of which will unfold as public expenditure faces a difficult period because of problems of macro-economic imbalance.     

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。     

Utility maximizing bureaucrats: The bureaucrat's point of view

In this paper we develop a model to examine the extent to which bureaucrats are maximizing their own utility. In the spirit of Williamson (1964) and Simon (1957), we assume that bureaucrats are utility maximizers but not necessarily cost minimizers and we investigate how well the bureaucrat is doing in relation to his own goals. First, we hypothesize a utility function for the bureaucrat — we assume that the bureaucrat gains utility from producing municipal services as well as from hiring additional labor and capital. Then, using the concept of money metric utility, we determine the minimum expenditure necessary to achieve the same level of utility actually observed. Secondly, we determine the bureaucrat's distance from the utility maximizing choice of resources for a given level of expenditure. Finally, using a sample of public sector bureaucrats we attempt to explain the variation in wasted expenditure across municipalities and why bureaucrats might be underutilizers of each input relative to their own utility maximizing point.     

Fiscal decentralization and the size of government: a European country empirical analysis

This article is an original contribution to the understanding of the relationship between fiscal decentralization and government size. Using a panel data set of the EU-15 countries, we analyse the effect of decentralization on aggregate, national and subnational government sizes by separating the long run effects of decentralization from its short run dynamics. In the long run, tax autonomy reduces central expenditure but increases—and to a greater extent—subnational public expenditure, leading to higher aggregate public expenditure. We find also that vertical imbalances tend to increase the sizes of subnational, national and aggregate governments.     

The Impact of Public Officials’ Corruption on the Size and Allocation of U.S. State Spending

This article demonstrates the impact of public officials’ corruption on the size and allocation of U.S. state spending. Extending two theories of “excessive” government expansion, the authors argue that public officials’ corruption should cause state spending to be artificially elevated. Corruption increased state spending over the period 1997–2008. During that time, the 10 most corrupt states could have reduced their total annual expenditure by an average of $1,308 per capita—5.2 percent of the mean per capita state expenditure—if corruption had been at the average level of the states. Moreover, at the expense of social sectors, corruption is likely to distort states’ public resource allocations in favor of higher‐potential “bribe‐generating” spending and items directly beneficial to public officials, such as capital, construction, highways, borrowing, and total salaries and wages. The authors use an objective, concrete, and consistent measurement of corruption, the number of convictions.     

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。     

The impact of government structure on local public expenditures

Though the relationship between local government structure and expenditure has received considerable attention, there is little consensus as to how the features of representative government affect local expenditure. An exception is city council size, which has consistently been found to be positively related to spending. Previous results rely on cross-sectional estimation which may be subject to omitted variable bias. This paper analyzes three components of municipal governments—the form of government, the size of the city council, and the election method of city councilors. Once fixed effects estimation is employed, the positive relationship between city council size and expenditure disappears.     

The determination of local public expenditures and the principal and agent relation: A case study

The principal and agent relationship is important in the public sector. There, elected or appointed representatives act on behalf of the citizens of their jurisdictions. This paper examines the importance of the budget referendum, which allows the principals to approve or disapprove the proposal of a set of agents, in the context of local public expenditure decisions. We test the null hypothesis that the institution of referendum, when compared to a nonreferendum institution, does not lead to significantly different expenditure behavior.     

Tax decentralization and local government size

This paper investigates the relationship between fiscal federalism and the sizes of local governments. While many empirical studies emphasized that grants encourage the growth of local public spending and local taxes constrain it, they are more silent regarding the effects of different types of tax autonomy. The paper addresses this issue by arguing that tax decentralization as organized on tax bases used only by local governments (tax-separation), rather than on tax-base sharing, would restrain local public expenditures. Using an unbalanced panel of OECD countries, the key finding is that only property taxes—mostly based on a “tax-separation” scheme—seem to favor smaller local governments. Thus, while tax decentralization is a necessary condition for limiting the growth of local governments, it does not appear sufficient, as tax-separation schemes among government levels would in fact be required.     

Decentralization and Corruption: Evidence from U.S. Federal Transfer Programs

While some recent evidence suggests that more decentralizationis associated with reduced corruption, no empirical work hasexamined whether different types of decentralization havedifferential effects on corruption. The theoretical literaturehas emphasized that expenditure decentralization will only beeffective if accompanied by the devolution of revenuegeneration to local governments. In this paper we examine thishypothesis empirically, by studying the mismatch betweenrevenue generation and expenditure in U.S. states. Largerfederal transfers are associated with higher rates ofconviction for abuse of public office, supporting the theorythat soft-budget constraints created by federal transfers arepotentially problematic.     

HIV/AIDS,governance and development: the public administration factor

This paper provides an overview of the literature concerned with the impact of HIV on public administration, looking in particular at projections of the impact of HIV/AIDS on public expenditure, the impact of attrition on the health and education sectors and on the civil service as a whole. ‘Success stories’ such as Uganda and Senegal are discussed through their representation in the literature, and ‘political commitment’ is identified as a critical but under‐theorised factor in tackling HIV. Having taken as its starting point the existing work on HIV and governance, the paper then considers the impact of the epidemic in conditions of state vacuum—conflict situations. The paper concludes that governance is both victim of, and part of the solution to, the problems of HIV/AIDS. Copyright © 2004 John Wiley & Sons, Ltd.     

These rules are made for spending: testing and extending the law of 1/n

What is the influence of the rules of political representation on local spending? This research tests the law of 1/n in the Portuguese local context and finds that the law fails to apply. We suggest an alternative measure—the density of representation—to assess the impact of the rules of city council representation on local public expenditures. Density of representation is defined as the number of elected officials in the city council divided by city population. We find an S-shaped relationship between the density of representation and the level of local government expenditures. The level of municipal spending initially declines with increases in the density of representation, reflecting an increase in the ability of constituents to monitor their elected representatives. At higher levels of representation density, the relationship becomes positive, suggesting that the dynamics of the budgetary commons become salient. The relationship becomes negative again for extremely high density of representation owing to increases in the transaction costs of legislative decision-making. This paper discusses the implications of our findings for the reform of local government institutions and the rules of political representation.     

公共支出效率评价——带非自主决定输入的两阶段数据包络模型

公共支出的效率评价是政府进行有效公共支出管理的基础,正确评价公共支出效率也是各国政府需要研究和解决的问题.经济学是通过比较公共支出前后的社会福利变化来衡量公共支出效率的,然而,社会福利是由公共支出与私人支出共同决定的,而且公共支出的增加是有机会成本的.因此,我们不能通过忽略私人支出,而单独分析公共支出对社会福利的影响的方式来衡量公共支出的效率.同时,各种原因共同导致政府通过公共支出提供的公共产品组合往往与社会公众的实际需求不一致.本文尝试在分析公共支出的效率时,把私人支出也纳入分析的范畴,同时提出了一种方法--带非自主决定输入的两阶段数据包络模型,试图解决在政府与公众偏好不一致情况下的公共支出的效率评价问题,并按照中国的数据进行了实证检验.     

ACCOUNTABILITY, EFFICIENCY AND THE ROYAL COMMISSION ON AUSTRALIAN GOVERNMENT ADMINISTRATION

Abstract: This paper deals first with alternative concepts of accountability and efficiency. It views accountability—and associated concepts of efficiency—in a hierarchy of increasing sophistication and potential usefulness, but corresponding operational difficulty. The lowest level is fiscal or fiduciary accountability, relating to the actual expenditure of funds and procedures by which that expenditure is accounted for. The second level is efficiency accountability, defined in terms of the ratio of some physical measure of output to cost. The most sophisticated level is effectiveness accountability, in which the output measures used reflect the attainment of objectives or programs. Corresponding to these levels is a hierarchy of approaches to auditing, namely financial, efficiency, and effectiveness auditing.
The second part of the paper looks at the present situation in Australia and at the recommendations of the Royal Commission on Australian Government Administration in terms of this framework. It argues that the government should commit itself to a continuing, comprehensive process of analysis and evaluation of public programs and activities aimed at making programs efficiently effective in a manner consistent with regular financial procedures. A "package" for implementing this approach—including revised institutional arrangements—is discussed in terms of the difficulties likely to be encountered—difficulties such as the shortage of capable personnel and problems of extending analytical practices to the State and local spheres of government.