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Government Spending (government + spending)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting86%
Humanities and Social Sciences13%
Distribution within Business, Economics, Finance and Accounting
General & Introductory Economics63%
Public Economics22%
3 Other Subdomains15%

Selected Abstracts

STOP US BEFORE WE SPEND AGAIN: INSTITUTIONAL CONSTRAINTS ON GOVERNMENT SPENDING

ECONOMICS & POLITICS, Issue 3 2006
DAVID M. PRIMO
A distributive politics model establishes that the presence of exogenously enforceable spending limits reduces spending and that the effect of executive veto authority is contingent on whether spending is capped and whether the chief executive is a liberal or conservative. Surprisingly, when spending limits are in place, governments with conservative executives spend more than those with more liberal chief executives. Limits are welfare improving, as is the executive veto when it leads to the building of override coalitions. Using 32 years of US state budget data, this paper also establishes empirically that strict balanced budget rules constrain spending and also lead to less pronounced short-term responses to fluctuations in a state's economy. Party variables like divided government and party control of state legislatures tend to have little or no direct effect, with political institutions and economic indicators explaining much of the variation in state spending. [source]

POLITICAL ECONOMY OF GOVERNMENT SPENDING FOR TRADE LIBERALIZATION: POLITICS OF AGRICULTURE RELATED GOVERNMENT SPENDING FOR THE URUGUAY ROUND IN JAPAN

THE JAPANESE ECONOMIC REVIEW, Issue 2 2010
KOZO HARIMAYA
This paper investigates the effect of political factors on the interregional allocation of the budget to assist farmers in coping with agricultural trade liberalization in Japan. We present a simple model to show the relationship between political factors and interregional budget allocation and empirically examine whether political factors played a key role in the interregional allocation of Japanese government spending for the Uruguay Round agricultural trade liberalization. Our findings show that this allocation was distorted due to political reasons, which was problematic from the standpoints of fairness and social efficiency. [source]

Unemployment, Government Spending and the Laffer Effect,

FISCAL STUDIES, Issue 2 2010
Ludger Linnemann
E62 Abstract The paper studies the effects of income tax rate changes in a general equilibrium model with frictional unemployment. Laffer curve effects, by which a tax rate reduction may increase the level of government spending or its share in output, are shown to be possible under certain conditions. These are the presence of unemployment benefit payments, government budget balance through fiscal spending adjustment and limited quantitative importance of labour reallocation costs. Endogenous government spending acts as a fiscal accelerator if the fiscal burden of unemployment benefit payments is large, but reduces the employment effects of tax rate cuts if it is low. [source]

Government Spending and the Taylor Principle

JOURNAL OF MONEY, CREDIT AND BANKING, Issue 1 2009
GISLE JAMES NATVIK
public expenditures; Taylor principle; fiscal policy rules; rule-of-thumb consumers This paper explores how government size affects the scope for equilibrium indeterminacy in a New Keynesian economy, where part of the population live hand-to-mouth. The main result is that a higher level of public consumption is likely to generate indeterminacy and render the Taylor principle insufficient as criterion for equilibrium uniqueness. This holds even though fiscal policy serves to reduce swings in current income. Only if government consumption is a substitute for private consumption, will it narrow the scope for indeterminacy. Hence monetary policy should be conducted with an eye to the amount and composition of government consumption. [source]

The Size and Composition of Government Spending in Europe and Its Impact on Well-Being

KYKLOS INTERNATIONAL REVIEW OF SOCIAL SCIENCES, Issue 3 2010
Zohal Hessami
SUMMARY This paper empirically analyzes whether large governments in Europe reflect efficient responses to a changing social and economic environment (,welfare economic view') as opposed to wasteful spending (,public choice view'). To this end, the effect of government size on subjective well-being is estimated in a combined survey and country-level dataset covering 153,268 respondents from twelve EU countries over the 1990,2000 period. The first finding is an inversely U-shaped relationship between government size and well-being. In addition, the analysis suggests that given the high institutional quality as compared to other parts of the world there might be scope for a further enlargement of governments in the EU from a well-being perspective. However, one must acknowledge that the effect on well-being may be quite small and that democratic societies in Europe have no experience with even larger governments. The investigation also reveals that the impact of government size on well-being depends negatively on levels of corruption and positively on the extent of decentralization. Moreover, left-wing voters and low-income earners are the main beneficiaries of a large public sector. Finally, in all twelve EU countries included in the sample higher levels of well-being could have been achieved by allocating a higher share of public resources to education, while Finland and Germany could have given an additional boost to well-being by cutting expenditures on social protection. [source]

Party Strength, the Personal Vote, and Government Spending

AMERICAN JOURNAL OF POLITICAL SCIENCE, Issue 2 2010
David M. Primo
"Strong" political parties within legislatures are one possible solution to the problem of inefficient universalism, a norm under which all legislators seek large projects for their districts that are paid for out of a common pool. We demonstrate that even if parties have no role in the legislature, their role in elections can be sufficient to reduce spending. If parties in the electorate are strong, then legislators will demand less distributive spending because of a decreased incentive to secure a "personal vote" via local projects. We estimate that spending in states with strong party organizations is at least 4% smaller than in states where parties are weak. We also find evidence that strong party states receive less federal aid than states with weak organizations, and we theorize that this is because members of Congress from strong party states feel less compelled to secure aid than members from weak party states. [source]

Cointegration, Government Spending and Private Consumption: Evidence from Japan

THE JAPANESE ECONOMIC REVIEW, Issue 2 2004
Tsung-Wu Ho
Assuming a CRRA preference, this paper shows that there is a cointegration restriction implied by the intra-temporal first-order condition in the consumption function. This restriction predicts a cointegrated system of government consumption, private consumption, and their relative price. Our analysis indicates that, first, Johansen's VECM confirms the theoretical prediction that is supported by the data of Japan; moreover, Bierens' (1997) nonparametric estimator severely contradicts with the theoretical model and fits the data poorly; second, Japanese people have increasing willingness to rearrange their consumption over time. Besides, the intratemporal relationship between private and government consumption remains relatively stable over time. [source]

Indonesian Local Government Spending, Taxing and Saving: An Explanation of Pre- and Post-decentralization Fiscal Outcomes*

ASIAN ECONOMIC JOURNAL, Issue 3 2005
Blane D. Lewis
H77; O18; R51 As a result of Indonesia's decentralization program, local governments have gained significantly more responsibility for service delivery, considerably larger fiscal resources, and much greater authority over the use of those resources than before. The present paper develops a simple budget model to describe and explain the substantial differences in pre- and post-decentralization local government fiscal behavior related to spending, taxing and saving. During the post-decentralization period special attention is paid to the fiscal behavior of natural resource rich regions. Among other things, the evidence suggests that: post-decentralization local government spending is partly responsive to increasing needs and partly the subject of elite capture; local government taxation has become more aggressive under decentralization and appears to be mostly driven by local bureaucratic expectations related to routine overhead budgets; and the increased savings of local governments during the post-decentralization period is determined to a large degree by delayed central government transfer payments. [source]

The Intratemporal Substitution between Government Spending and Private Consumption: Empirical Evidence from Taiwan

ASIAN ECONOMIC JOURNAL, Issue 3 2001
Ru-Lin ChiuArticle first published online: 18 DEC 200
In this paper, we investigate the idea that a general model of consumption should allow for the direct effect of government consumption. We show, given an assumed preference specification, that there is a cointegration restriction implied by an intraperiod first-order condition of the model. This restriction leads to a linear deterministic cointegrated system of government consumption, private consumption and their relative price that is consistent with the data for Taiwan. The intratemporal elasticity of substitution between government and private consumption is estimated to be about 1.1. Overall, we find consistent empirical evidence in support of our model. [source]

Public capital formation and labor productivity growth in Chile

CONTEMPORARY ECONOMIC POLICY, Issue 2 2000
MD. Ramirez
Following the lead of the endogenous growth literature, this article analyzes the impact on labor productivity growth of public and private investment spending in Chile. Using cointegration analysis, the results of the dynamic labor productivity function for the 1960,95 period show that (lagged) public and private investment spending, as well as the rate of growth in exports, has a positive and highly significant effect on the rate of labor productivity growth. The estimates also indicate that increases in government consumption spending have a negative effect on the rate of labor productivity growth, thus suggesting that the composition of government spending may also play an important role in determining the rate of labor productivity growth. The findings call into question the politically expedient policy in many Latin American countries of disproportionately reducing public capital expenditures to meet targeted reductions in the fiscal deficit as a proportion of GDP. [source]

Plebiscites, Fiscal Policy and the Poor: Learning from US Experience with Direct Democracy

DEVELOPMENT POLICY REVIEW, Issue 5 2005
Arthur A. Goldsmith
Many countries are contemplating direct political participation as a way of giving marginalised people more say in national fiscal policies. The United States is a natural laboratory for studying how large-scale direct democracy actually works in this regard. Every state allows voters to decide certain ballot questions about how to raise and spend public revenue. The 100-year record shows, however, that state-wide plebiscites fail to produce uniformly equitable or financially sustainable government budgets, or to mobilise low-income groups to defend their economic interests. When called upon to make decisions about state government spending, the electorate is apt to disregard any hardship for poor people. Traditional political parties and advocacy organisations are usually a more promising avenue for promoting anti-poverty budgets. [source]

Twin deficits: squaring theory, evidence and common sense

ECONOMIC POLICY, Issue 48 2006
Giancarlo Corsetti
SUMMARY Budget deficits and current accounts OPENNESS AND FISCAL PERSISTENCE Simple accounting suggests that shocks to the government budget move the current account in the same direction, and this ,twin deficits' intuition leads many observers to call for fiscal consolidation in the US as a necessary measure to reduce the large external imbalance of this country. The response of other macroeconomic variables to budget developments, however, has important implications for ,twin deficits' and for this policy prescription. Focusing on the international transmission of fiscal policy shocks via terms of trade changes, we show that the likelihood and magnitude of twin deficits increases with the degree of openness of an economy, and decreases with the persistence of fiscal shocks. We take this insight to the data and investigate the transmission of fiscal shocks in a vector autoregression (VAR) model estimated for Australia, Canada, the UK and the US. We find that in less open countries the external impact of shocks to either government spending or budget deficits is limited, while private investment responds in line with our theoretical prediction. These results suggest that a fiscal retrenchment in the US may have a limited impact on its current external deficit. , Giancarlo Corsetti and Gernot J. Müller [source]

Trade spill-overs of fiscal policy in the European Union: a panel analysis

ECONOMIC POLICY, Issue 48 2006
Roel Beetsma
SUMMARY Spill-overs in the EU We explore international spill-overs from fiscal policy shocks via trade in Europe. To assess and quantify the channels through which a fiscal expansion stimulates domestic activity, foreign exports, and foreign output, we estimate a dynamic empirical model of government spending, net taxes, and output, and combine its estimates with a panel model of trade linkages across European countries. The baseline estimates of both models are quite robust and statistically significant. Our results indicate that trade spill-overs of fiscal shocks should be taken into account when assessing the character and intensity of economic integration in the European Union. , Roel Beetsma, Massimo Giuliodori and Franc Klaassen [source]

The political economy of direct legislation: direct democracy and local decision,making

ECONOMIC POLICY, Issue 33 2001
Lars P Feld
Local and regional governments account for an important share of total government spending and, given the decentralization trend in OECD nations, this is likely to increase. How should this spending be governed? This article argues that direct democracy is best suited to organize decision,making at the state and local level. To support this, we present the main theoretical arguments on why and how referenda and initiatives affect fiscal policy outcomes. The basic argument concerns voter control. Under representative democracy, citizens only have direct control at election time. With referenda and initiatives, citizens can selectively control their representatives on specific policies whenever they deviate sufficiently from citizens' preferences. As a result, fiscal policy outcomes are likely to more closely reflect voter preferences. We empirically test this on Swiss data since Switzerland provides a ,natural laboratory' for local governance. The governance structures of Swiss cantons and localities with respect to fiscal issues range from classic parliamentary democracy to pure direct democracy, and an important part of spending and taxation is controlled at these levels. Specifically, we estimate an econometric model of fiscal behaviour using data from 1986 to 1997 for the 26 Swiss cantons, and 1990 data on 134 local communities. It is shown that mandatory referenda on fiscal issues at both levels have a dampening effect on expenditure and revenue, and at the local level also on public debt. Combining this with existing empirical evidence leads to a relatively uncontested result, namely that elements of direct democracy are associated with sounder public finances, better economic performance and higher satisfaction of citizens. [source]

Unemployment, Government Spending and the Laffer Effect,

FISCAL STUDIES, Issue 2 2010
Ludger Linnemann
E62 Abstract The paper studies the effects of income tax rate changes in a general equilibrium model with frictional unemployment. Laffer curve effects, by which a tax rate reduction may increase the level of government spending or its share in output, are shown to be possible under certain conditions. These are the presence of unemployment benefit payments, government budget balance through fiscal spending adjustment and limited quantitative importance of labour reallocation costs. Endogenous government spending acts as a fiscal accelerator if the fiscal burden of unemployment benefit payments is large, but reduces the employment effects of tax rate cuts if it is low. [source]

The Distribution of Public Expenditure across the UK Regions

FISCAL STUDIES, Issue 1 2003
Iain McLean
Abstract The distribution of UK revenue to the regional and territorial governments, administrations and authorities that spend the money is based on a hotchpotch of badly designed formulae. This is widely recognised. The Barnett formula, which allocates money to the devolved territories, has been attacked from all sides, its consequences described as ,terribly unfair' by its progenitor, Lord Barnett. The mechanism by which resources are distributed to local authorities within the English regions has been abandoned by the government, although its replacement has not yet been determined. This paper argues that a common basis for government spending across the regions and territories of the UK will be more equitable and efficient, and may even depoliticise the financial framework of the UK. [source]

The Cost of Nominal Rigidity in NNS Models

JOURNAL OF MONEY, CREDIT AND BANKING, Issue 7 2007
MATTHEW B. CANZONERI
cost of nominal rigidity We present a model with Calvo wage and price setting, capital formation, and estimated rules for government spending and monetary policy. Our model captures many aspects of U.S. data, including the volatility that has been observed in various efficiency gaps. We estimate the cost of nominal rigidity,welfare under flexible wages and prices minus welfare with nominal rigidities,to be as much as 3% of consumption each period. Since there are interest rate rules that virtually eliminate this cost, our model suggests that,contrary to Lucas's (2003) assertion,there is considerable room for improvement in demand management policy. [source]

Debt Stabilizing Fiscal Rules

JOURNAL OF PUBLIC ECONOMIC THEORY, Issue 5 2010
PHILIPPE MICHEL
Unstable government debt dynamics can typically be stabilized around a certain target level of debt by adjustments in various fiscal instruments, like government spending, transfers, or taxes. This paper investigates properties of debt stabilizing rules which link the needed budgetary adjustments to the state of the economy. The paper establishes that the magnitude of the target level of long-run debt is a key determinant of whether it is possible to find a rule of this type that can be implemented under all available fiscal instruments. Specifically, considering linear feedback rules, the paper demonstrates that there may well exist a critical target level of debt beyond which this is no longer possible. From an applied perspective, this finding is of particular relevance in the context of a monetary union with decentralized fiscal policies. Depending on the target level of debt, there might be a conflict between a common fiscal framework that tracks deficit developments as a function of the state of the economy and the unrestricted choice of fiscal policy instruments at the national level. [source]

Intergenerational Allocation of Government Expenditures: Externalities and Optimal Taxation

JOURNAL OF PUBLIC ECONOMIC THEORY, Issue 1 2008
KAZI IQBAL
This paper studies optimal capital and labor income taxes when the benefits of public goods are age-dependent. Provided the government can impose a consumption tax, it can attain the first-best resource allocation. This involves the uniform taxation of the cohorts' labor income and a zero capital income tax. With no consumption tax and optimally chosen government spending, labor income should be taxed nonuniformly across cohorts and the capital income tax should be nonzero. Deviations of the public goods from their respective optima create distortions. These affect the labor supply decisions of both cohorts and capital accumulation, providing a further reason to tax (or subsidize) capital income. [source]

Government size and openness revisited: the case of financial globalization

KYKLOS INTERNATIONAL REVIEW OF SOCIAL SCIENCES, Issue 3 2009
Alena Kimakova
SUMMARY The volatility of international capital flows to emerging markets has been well documented. Financial globalization may not in general fulfill its theoretical role as a risk sharing mechanism in financially underdeveloped economies, and hence may provide an impetus for compensating government spending. Comparative studies of the public sector have provided evidence of a robust positive association between government size and openness of the economy to trade flows. This paper extends the existing literature by investigating the relationship between government size and financial openness for 87 developing and developed countries between 1976 and 2003. The analysis reveals a positive relationship between exposure to international capital flows and government size. Furthermore, interacting capital flows with income levels shows that richer open economies tend to have smaller government size. These findings are consistent with the hypothesis that benefits of financial integration, in terms of improved risk-sharing and consumption smoothing, accrue only beyond a certain minimum level of financial development. [source]

PUBLIC DEBT AS PRIVATE WEALTH: SOME EQUILIBRIUM CONSIDERATIONS

METROECONOMICA, Issue 4 2006
Article first published online: 13 NOV 200, Ekkehart Schlicht
ABSTRACT Government bonds are interest-bearing assets. Increasing public debt increases wealth, income and consumption demand. The smaller government expenditure is, the larger consumption demand must be in equilibrium, and the larger must be public debt. Conversely, lower public debt implies higher government spending and taxation. Public debt plays, thus, an important role in establishing equilibrium. It distributes output between consumers and government. In case of insufficient demand, a larger public debt entails higher private consumption and less public spending. If upper bounds on public debt are introduced (as in the Maastricht treaty), such constraints place lower bounds on taxation and public spending and may rule out macroeconomic equilibrium. As an aside, a minor flaw in Domar's (American Economic Review, 34 (4), pp. 798,827) classical analysis is corrected. [source]

Die Auswirkungen der demographischen Veränderungen auf die Budgetstrukturen der öffentlichen Haushalte

PERSPEKTIVEN DER WIRTSCHAFTSPOLITIK, Issue 2 2007
Helmut Seitz
Special attention is given to differences between East and West Germany. Whereas East German state and local governments can expect significant savings from shrinking population size and from shifts in the age structure, subnational government budgets in the West are only slightly affected. Federal government spending will increase due to the rise in spending on the elderly. The results suggest that significant adjustments of public budgets at the expenditure side are necessary in order to cope with the fiscal challenges of demographic change. [source]

Government Subsidies for Professional Team Sports in Australia

THE AUSTRALIAN ECONOMIC REVIEW, Issue 3 2009
John K. Wilson
Professional team sports represent an important aspect of Australian life. Interest is great, and a significant portion of household expenditure is directed toward sports-related goods and services. Based on international comparisons and on the size of attendance and television revenues, the sector should be highly profitable. Yet, significant amounts of public funding and regulatory exemptions are afforded to team sports in Australia. This article analyses the magnitude and reasons for government spending that subsidises professional team sports. [source]

China's Local Political Budget Cycles

AMERICAN JOURNAL OF POLITICAL SCIENCE, Issue 3 2009
Gang Guo
This article examines the political budget cycles in Chinese counties. The shift to a more performance-based cadre evaluation and mobility system during the reform era has created an incentive structure for local leaders to increase government spending at strategically important time points during their tenure to enhance the prospect of official promotion. Such expenditures help local leaders to impress their superiors with economic and political achievements, especially those visible and quantifiable large-scale development projects. At the same time, economic and fiscal decentralization increased the capacity of local leaders to influence government budget expenditures as the need rises. The hypothesized curvilinear relationship between a leader's time in office and increased spending was tested using a comprehensive data set of all Chinese counties from 1997 through 2002. The panel data analysis shows that growth in local government spending per capita is the fastest during a leader's third and fourth years in office. [source]

Changing Sides or Changing Minds?

AMERICAN JOURNAL OF POLITICAL SCIENCE, Issue 2 2006
Party Identification, Policy Preferences in the American Electorate
Scholars have long debated the individual-level relationship between partisanship and policy preferences. We argue that partisanship and issue attitudes cause changes in each other, but the pattern of influence varies systematically. Issue-based change in party identification should occur among individuals who are aware of party differences on an issue and find that issue to be salient. Individuals who are aware of party differences, but do not attach importance to the issue, should evidence party-based issue change. Those lacking awareness of party differences on an issue should show neither effect. We test our account by examining individuals' party identifications and their attitudes on abortion, government spending and provision of services, and government help for African Americans using the 1992-94-96 National Election Study panel study, finding strong support for our argument. We discuss the implications of our findings both for the microlevel study of party identification and the macrolevel analysis of partisan change. [source]

The Causes of Unemployment in Interwar Australia

THE ECONOMIC RECORD, Issue 243 2002
Nicholas H. Dimsdale
This paper examines the factors contributing to unemployment in Australia during the Great Depression of the 1930s. Previous writers have emphasised the role of demand,side variables but it has also been argued that excessive real wages caused unemployment. The Layard,Nickell model, developed originally for the postwar British economy, is applied to Australian data. The empirical results confirm that demand shocks in the form of changes in government spending and in the terms of trade were important in both downturn and recovery. Wage indexation resulted in some rigidity of real wages but this was not a major cause of unemployment. [source]

Testing For Government Intertemporal Solvency: A Smooth Transition Error Correction Model Approach

THE MANCHESTER SCHOOL, Issue 6 2001
Andrea Cipollini
Applied macroeconomists have tested for the government intertemporal solvency condition by either testing for linear stationarity in the total government deficit series or testing for linear cointegration between total government spending and total tax revenues. A number of authors have focused, in particular, on structural breaks in the government deficit process. In this paper, we use a smooth transition error correction model to test and estimate a shift in the adjustment toward a linear cointegration relationship between the government spending to output ratio and the total tax revenues to output ratio. Estimation results show that government authorities react only to large (in absolute value) changes in the government spending to output ratio. Residual diagnostic tests are provided and they show that the model is not misspecified. [source]

Output Taxation, Human Capital and Growth

THE MANCHESTER SCHOOL, Issue 2 2000
Rosa Capolupo
In this paper we investigate the long-run effects of government spending and taxation in an endogenous growth setting. The model is a variant of Barro's model (,Government Expenditure in a Simple Model of Endogenous Growth', Journal of Political Economy, Vol. 98, 1990, pp. S103,S125) and Lucas's model (,On the Mechanics of Economic Development', Journal of Monetary Economics, Vol. 22, 1988, pp. 3,42) in which human capital accumulation is driven by government spending on public education. To balance the budget the government levies a tax on output in two alternative specifications of the human capital accumulation equation. The results consolidate some recent findings that taxation, when it is used for productive purposes, may lead to faster growth. Growth rates increase with taxes up to a level around 60,70 per cent. [source]

Indonesian Local Government Spending, Taxing and Saving: An Explanation of Pre- and Post-decentralization Fiscal Outcomes*

ASIAN ECONOMIC JOURNAL, Issue 3 2005
Blane D. Lewis
H77; O18; R51 As a result of Indonesia's decentralization program, local governments have gained significantly more responsibility for service delivery, considerably larger fiscal resources, and much greater authority over the use of those resources than before. The present paper develops a simple budget model to describe and explain the substantial differences in pre- and post-decentralization local government fiscal behavior related to spending, taxing and saving. During the post-decentralization period special attention is paid to the fiscal behavior of natural resource rich regions. Among other things, the evidence suggests that: post-decentralization local government spending is partly responsive to increasing needs and partly the subject of elite capture; local government taxation has become more aggressive under decentralization and appears to be mostly driven by local bureaucratic expectations related to routine overhead budgets; and the increased savings of local governments during the post-decentralization period is determined to a large degree by delayed central government transfer payments. [source]

Deviation from Purchasing Power Parity: Evidence from Malaysia, 1973,1997

ASIAN ECONOMIC JOURNAL, Issue 1 2000
Goh Soo Khoon
This paper presents an empirical test of Purchasing Power Parity (PPP) applied to the Malaysia ringgit for the period from 1973 (CPI) and 1984 (WPI) to 1997. Consistent with other research findings, it is detected that real exchange rate follows a random walk. Using multivariate cointegration methodology for the long-run relationship between real exchange rate and certain macro-economic variables, the study provides evidence supporting a long-run relationship between the real exchange rate and the current account balance and government spending, the last two variables have been not included in previous studies of this economy. The causality test between real exchange rate with the current account balance and government spending, however, does not receive support from the error-correction model. This suggests that both government spending and current account balance are not adequate to explain the changes in ringgit real exchange rate. The puzzle still remains unsolved. [source]