Public Expenditure and Growth
Given that public spending will have a positive impact on GDP if the benefits exceed the marginal cost of public funds, the present paper deals with measuring costs and benefits of public spending. The paper discusses one cost seldom considered in...
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| Format: | Policy Research Working Paper |
| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2007/10/8466839/public-expenditure-growth http://hdl.handle.net/10986/7366 |
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okr-10986-7366 |
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oai_dc |
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Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
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World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ABSENTEEISM ACCOUNTING ADMINISTRATIVE COSTS ADVERSE EFFECT AGGREGATE COST AGRICULTURAL OUTPUT ALLOCATION AMOUNT OF RISK AVERAGE GROWTH BANKS BENCHMARK BENCHMARKING BENCHMARKS BENEFICIARIES BENEFICIARY BENEFITS OF PUBLIC SPENDING BUDGET CONSTRAINT BUSINESS CYCLE CALCULATION CALCULATIONS CAPITAL ACCOUNT CAPITAL ACCUMULATION CAPITAL EXPENDITURES CAPITAL FORMATION CAPITAL SPENDING CAPITAL STOCK CAPITAL STOCKS CASH TRANSFER CD CENTRAL BANKS CENTRAL BUDGET CENTRAL BUDGET OFFICE CENTRAL GOVERNMENT COMPLIANCE COSTS COMPOSITION OF PUBLIC SPENDING CONSUMERS CONSUMPTION EXPENDITURE CONSUMPTION TAXES CONTINGENT LIABILITIES CONTRACTUAL ARRANGEMENTS COST INCREASES COST-BENEFIT ANALYSIS CURRENT PRICES CUT SPENDING DATA AVAILABILITY DEGREE OF RISK DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DISCOUNT RATE DISCOUNT RATES EARNINGS ECONOMIC ACTIVITY ECONOMIC ANALYSIS ECONOMIC DEVELOPMENT ECONOMIC EFFICIENCY ECONOMIC GROWTH ECONOMIC RATE OF RETURN ECONOMIC UNCERTAINTY EDUCATION SPENDING EDUCATIONAL ATTAINMENT EDUCATIONAL PROGRAM EFFECTIVENESS OF PUBLIC SPENDING EFFICIENCY OF PUBLIC SPENDING EFFICIENCY OF RESOURCE USE ELASTICITY ELECTRICITY EQUILIBRIUM EXCHANGE RATE EXPENDITURE GROWTH EXPENDITURE PROGRAMS EXPORT PERFORMANCE FINANCES FINANCIAL MARKETS FISCAL MANAGEMENT FISCAL POLICY FISCAL POSITIONS FLOATING EXCHANGE RATE GDP GDP PER CAPITA GOVERNMENT CONSUMPTION GOVERNMENT CONSUMPTION EXPENDITURE GOVERNMENT EXPENDITURE GOVERNMENT SPENDING GROWTH RATE HEALTH OUTCOMES HEALTH PROGRAMS HIGHER EXPENDITURE HOUSEHOLD FINANCES HOUSING HOUSING PRICES HUMAN CAPITAL INCOME INCOME DISTRIBUTION INCOME EFFECT INCOME GROUP INCOME GROUPS INCOME LEVEL INCOME TAXES INCOMES INCREASE IN INCOME INDEBTED COUNTRIES INDEXATION INEFFICIENCY INFRASTRUCTURE DEVELOPMENT INFRASTRUCTURE PROJECTS INSTITUTIONAL CAPACITY INSTRUMENT INTERNATIONAL BANK INVENTORY INVESTMENT PROJECTS INVESTMENT SPENDING LABOR FORCE LABOR MARKET LITERACY LOAN LOCAL GOVERNMENTS LOCAL NEWSPAPERS LOW INCOME LOWER INCOME MACROECONOMIC ENVIRONMENT MACROECONOMICS MARGINAL COST MARGINAL PRODUCT MARGINAL TAX RATE MARKET FAILURES MARKET FORCES MATH MIDDLE INCOME COUNTRIES MONETARY POLICY MONETARY UNION MONETARY UNIONS NATIONAL BUDGET PARTIAL EQUILIBRIUM ANALYSIS PENSION PENSION BENEFITS PERMANENT INCOME PERMANENT INCOME HYPOTHESIS POLITICAL ECONOMY PORTFOLIO POVERTY RATES PRESENT VALUE PRICE CHANGES PRIMARY EDUCATION PRIVATE CAPITAL PRIVATE CONSUMPTION PRIVATE INVESTMENT PRIVATE SECTOR PRIVATE SECTOR PARTICIPATION PROBABILITY PRODUCTION FUNCTION PRODUCTION INPUTS PRODUCTIVE ASSETS PRODUCTIVITIES PRODUCTIVITY PRODUCTIVITY GROWTH PRODUCTIVITY INCREASES PROGRAM EVALUATIONS PROVISION OF GOODS PUBLIC PUBLIC BUDGETING PUBLIC BUDGETS PUBLIC CAPITAL PUBLIC CONSUMPTION PUBLIC DEBT PUBLIC DEBT MANAGEMENT PUBLIC EXPENDITURE PUBLIC EXPENDITURE MANAGEMENT PUBLIC FINANCES PUBLIC FUNDS PUBLIC INVESTMENT PUBLIC INVESTMENT IN INFRASTRUCTURE PUBLIC REVENUE PUBLIC SCHOOLS PUBLIC SECTOR PUBLIC SECTORS PUBLIC SERVICE PUBLIC SPENDING PUBLIC TRANSPORT RATE OF RETURN RATES OF RETURN RECURRENT COST RECURRENT COSTS RECURRENT EXPENDITURES RENTS RETURNS RISK AVERSE RISK AVERSION RISK TOLERANCE ROADS RULE OF LAW SALES SAVINGS SECONDARY SCHOOL SECONDARY SCHOOLS SIDE EFFECTS SOCIAL BENEFIT STAKEHOLDER STAKEHOLDERS STOCKS STREETS SUBSTITUTION EFFECT TAX TAX COLLECTIONS TAX RATE TAX REVENUE TAX SYSTEM TAXATION TOTAL FACTOR PRODUCTIVITY TOTAL WELFARE COST TRADE POLICY TRADING TRADING SYSTEM TRANSITION ECONOMIES TREASURY USER CHARGES UTILITIES VOUCHER PROGRAM VOUCHER PROGRAMS WAGE WAGE EXPENDITURES WEALTH WELFARE LOSS WORTH |
| spellingShingle |
ABSENTEEISM ACCOUNTING ADMINISTRATIVE COSTS ADVERSE EFFECT AGGREGATE COST AGRICULTURAL OUTPUT ALLOCATION AMOUNT OF RISK AVERAGE GROWTH BANKS BENCHMARK BENCHMARKING BENCHMARKS BENEFICIARIES BENEFICIARY BENEFITS OF PUBLIC SPENDING BUDGET CONSTRAINT BUSINESS CYCLE CALCULATION CALCULATIONS CAPITAL ACCOUNT CAPITAL ACCUMULATION CAPITAL EXPENDITURES CAPITAL FORMATION CAPITAL SPENDING CAPITAL STOCK CAPITAL STOCKS CASH TRANSFER CD CENTRAL BANKS CENTRAL BUDGET CENTRAL BUDGET OFFICE CENTRAL GOVERNMENT COMPLIANCE COSTS COMPOSITION OF PUBLIC SPENDING CONSUMERS CONSUMPTION EXPENDITURE CONSUMPTION TAXES CONTINGENT LIABILITIES CONTRACTUAL ARRANGEMENTS COST INCREASES COST-BENEFIT ANALYSIS CURRENT PRICES CUT SPENDING DATA AVAILABILITY DEGREE OF RISK DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DISCOUNT RATE DISCOUNT RATES EARNINGS ECONOMIC ACTIVITY ECONOMIC ANALYSIS ECONOMIC DEVELOPMENT ECONOMIC EFFICIENCY ECONOMIC GROWTH ECONOMIC RATE OF RETURN ECONOMIC UNCERTAINTY EDUCATION SPENDING EDUCATIONAL ATTAINMENT EDUCATIONAL PROGRAM EFFECTIVENESS OF PUBLIC SPENDING EFFICIENCY OF PUBLIC SPENDING EFFICIENCY OF RESOURCE USE ELASTICITY ELECTRICITY EQUILIBRIUM EXCHANGE RATE EXPENDITURE GROWTH EXPENDITURE PROGRAMS EXPORT PERFORMANCE FINANCES FINANCIAL MARKETS FISCAL MANAGEMENT FISCAL POLICY FISCAL POSITIONS FLOATING EXCHANGE RATE GDP GDP PER CAPITA GOVERNMENT CONSUMPTION GOVERNMENT CONSUMPTION EXPENDITURE GOVERNMENT EXPENDITURE GOVERNMENT SPENDING GROWTH RATE HEALTH OUTCOMES HEALTH PROGRAMS HIGHER EXPENDITURE HOUSEHOLD FINANCES HOUSING HOUSING PRICES HUMAN CAPITAL INCOME INCOME DISTRIBUTION INCOME EFFECT INCOME GROUP INCOME GROUPS INCOME LEVEL INCOME TAXES INCOMES INCREASE IN INCOME INDEBTED COUNTRIES INDEXATION INEFFICIENCY INFRASTRUCTURE DEVELOPMENT INFRASTRUCTURE PROJECTS INSTITUTIONAL CAPACITY INSTRUMENT INTERNATIONAL BANK INVENTORY INVESTMENT PROJECTS INVESTMENT SPENDING LABOR FORCE LABOR MARKET LITERACY LOAN LOCAL GOVERNMENTS LOCAL NEWSPAPERS LOW INCOME LOWER INCOME MACROECONOMIC ENVIRONMENT MACROECONOMICS MARGINAL COST MARGINAL PRODUCT MARGINAL TAX RATE MARKET FAILURES MARKET FORCES MATH MIDDLE INCOME COUNTRIES MONETARY POLICY MONETARY UNION MONETARY UNIONS NATIONAL BUDGET PARTIAL EQUILIBRIUM ANALYSIS PENSION PENSION BENEFITS PERMANENT INCOME PERMANENT INCOME HYPOTHESIS POLITICAL ECONOMY PORTFOLIO POVERTY RATES PRESENT VALUE PRICE CHANGES PRIMARY EDUCATION PRIVATE CAPITAL PRIVATE CONSUMPTION PRIVATE INVESTMENT PRIVATE SECTOR PRIVATE SECTOR PARTICIPATION PROBABILITY PRODUCTION FUNCTION PRODUCTION INPUTS PRODUCTIVE ASSETS PRODUCTIVITIES PRODUCTIVITY PRODUCTIVITY GROWTH PRODUCTIVITY INCREASES PROGRAM EVALUATIONS PROVISION OF GOODS PUBLIC PUBLIC BUDGETING PUBLIC BUDGETS PUBLIC CAPITAL PUBLIC CONSUMPTION PUBLIC DEBT PUBLIC DEBT MANAGEMENT PUBLIC EXPENDITURE PUBLIC EXPENDITURE MANAGEMENT PUBLIC FINANCES PUBLIC FUNDS PUBLIC INVESTMENT PUBLIC INVESTMENT IN INFRASTRUCTURE PUBLIC REVENUE PUBLIC SCHOOLS PUBLIC SECTOR PUBLIC SECTORS PUBLIC SERVICE PUBLIC SPENDING PUBLIC TRANSPORT RATE OF RETURN RATES OF RETURN RECURRENT COST RECURRENT COSTS RECURRENT EXPENDITURES RENTS RETURNS RISK AVERSE RISK AVERSION RISK TOLERANCE ROADS RULE OF LAW SALES SAVINGS SECONDARY SCHOOL SECONDARY SCHOOLS SIDE EFFECTS SOCIAL BENEFIT STAKEHOLDER STAKEHOLDERS STOCKS STREETS SUBSTITUTION EFFECT TAX TAX COLLECTIONS TAX RATE TAX REVENUE TAX SYSTEM TAXATION TOTAL FACTOR PRODUCTIVITY TOTAL WELFARE COST TRADE POLICY TRADING TRADING SYSTEM TRANSITION ECONOMIES TREASURY USER CHARGES UTILITIES VOUCHER PROGRAM VOUCHER PROGRAMS WAGE WAGE EXPENDITURES WEALTH WELFARE LOSS WORTH Herrera, Santiago Public Expenditure and Growth |
| relation |
Policy Research Working Paper; No. 4372 |
| description |
Given that public spending will have a
positive impact on GDP if the benefits exceed the marginal
cost of public funds, the present paper deals with measuring
costs and benefits of public spending. The paper discusses
one cost seldom considered in the literature and in policy
debates, namely, the volatility derived from additional
public spending. The paper identifies a relationship between
public spending volatility and consumption volatility, which
implies a direct welfare loss to society. This loss is
substantial in developing countries, estimated at 8 percent
of consumption. If welfare losses due to volatility are this
sizeable, then measuring the benefits of public spending is
critical. Gauging benefits based on macro aggregate data
requires three caveats: a) considering of the impact of the
funding (taxation) required for the additional public
spending; b) differentiating between investment and capital
formation; c) allowing for heterogeneous response of output
to different types of capital and differences in network
development. It is essential to go beyond
country-specificity to project-level evaluation of the
benefits and costs of public projects. From the micro
viewpoint, the rate of return of a project must exceed the
marginal cost of public funds, determined by tax levels and
structure. Credible evaluations require microeconomic
evidence and careful specification of counterfactuals. On
this, the impact evaluation literature and methods play a
critical role. From individual project evaluation, the
analyst must contemplate the general equilibrium impacts.
In general, the paper advocates for project evaluation as a
central piece of any development platform. By increasing the
efficiency of public spending, the government can
permanently increase the rate of productivity growth and,
hence, affect the growth rate of GDP. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Herrera, Santiago |
| author_facet |
Herrera, Santiago |
| author_sort |
Herrera, Santiago |
| title |
Public Expenditure and Growth |
| title_short |
Public Expenditure and Growth |
| title_full |
Public Expenditure and Growth |
| title_fullStr |
Public Expenditure and Growth |
| title_full_unstemmed |
Public Expenditure and Growth |
| title_sort |
public expenditure and growth |
| publisher |
World Bank, Washington, DC |
| publishDate |
2012 |
| url |
http://documents.worldbank.org/curated/en/2007/10/8466839/public-expenditure-growth http://hdl.handle.net/10986/7366 |
| _version_ |
1764402426497990656 |
| spelling |
okr-10986-73662021-04-23T14:02:34Z Public Expenditure and Growth Herrera, Santiago ABSENTEEISM ACCOUNTING ADMINISTRATIVE COSTS ADVERSE EFFECT AGGREGATE COST AGRICULTURAL OUTPUT ALLOCATION AMOUNT OF RISK AVERAGE GROWTH BANKS BENCHMARK BENCHMARKING BENCHMARKS BENEFICIARIES BENEFICIARY BENEFITS OF PUBLIC SPENDING BUDGET CONSTRAINT BUSINESS CYCLE CALCULATION CALCULATIONS CAPITAL ACCOUNT CAPITAL ACCUMULATION CAPITAL EXPENDITURES CAPITAL FORMATION CAPITAL SPENDING CAPITAL STOCK CAPITAL STOCKS CASH TRANSFER CD CENTRAL BANKS CENTRAL BUDGET CENTRAL BUDGET OFFICE CENTRAL GOVERNMENT COMPLIANCE COSTS COMPOSITION OF PUBLIC SPENDING CONSUMERS CONSUMPTION EXPENDITURE CONSUMPTION TAXES CONTINGENT LIABILITIES CONTRACTUAL ARRANGEMENTS COST INCREASES COST-BENEFIT ANALYSIS CURRENT PRICES CUT SPENDING DATA AVAILABILITY DEGREE OF RISK DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DISCOUNT RATE DISCOUNT RATES EARNINGS ECONOMIC ACTIVITY ECONOMIC ANALYSIS ECONOMIC DEVELOPMENT ECONOMIC EFFICIENCY ECONOMIC GROWTH ECONOMIC RATE OF RETURN ECONOMIC UNCERTAINTY EDUCATION SPENDING EDUCATIONAL ATTAINMENT EDUCATIONAL PROGRAM EFFECTIVENESS OF PUBLIC SPENDING EFFICIENCY OF PUBLIC SPENDING EFFICIENCY OF RESOURCE USE ELASTICITY ELECTRICITY EQUILIBRIUM EXCHANGE RATE EXPENDITURE GROWTH EXPENDITURE PROGRAMS EXPORT PERFORMANCE FINANCES FINANCIAL MARKETS FISCAL MANAGEMENT FISCAL POLICY FISCAL POSITIONS FLOATING EXCHANGE RATE GDP GDP PER CAPITA GOVERNMENT CONSUMPTION GOVERNMENT CONSUMPTION EXPENDITURE GOVERNMENT EXPENDITURE GOVERNMENT SPENDING GROWTH RATE HEALTH OUTCOMES HEALTH PROGRAMS HIGHER EXPENDITURE HOUSEHOLD FINANCES HOUSING HOUSING PRICES HUMAN CAPITAL INCOME INCOME DISTRIBUTION INCOME EFFECT INCOME GROUP INCOME GROUPS INCOME LEVEL INCOME TAXES INCOMES INCREASE IN INCOME INDEBTED COUNTRIES INDEXATION INEFFICIENCY INFRASTRUCTURE DEVELOPMENT INFRASTRUCTURE PROJECTS INSTITUTIONAL CAPACITY INSTRUMENT INTERNATIONAL BANK INVENTORY INVESTMENT PROJECTS INVESTMENT SPENDING LABOR FORCE LABOR MARKET LITERACY LOAN LOCAL GOVERNMENTS LOCAL NEWSPAPERS LOW INCOME LOWER INCOME MACROECONOMIC ENVIRONMENT MACROECONOMICS MARGINAL COST MARGINAL PRODUCT MARGINAL TAX RATE MARKET FAILURES MARKET FORCES MATH MIDDLE INCOME COUNTRIES MONETARY POLICY MONETARY UNION MONETARY UNIONS NATIONAL BUDGET PARTIAL EQUILIBRIUM ANALYSIS PENSION PENSION BENEFITS PERMANENT INCOME PERMANENT INCOME HYPOTHESIS POLITICAL ECONOMY PORTFOLIO POVERTY RATES PRESENT VALUE PRICE CHANGES PRIMARY EDUCATION PRIVATE CAPITAL PRIVATE CONSUMPTION PRIVATE INVESTMENT PRIVATE SECTOR PRIVATE SECTOR PARTICIPATION PROBABILITY PRODUCTION FUNCTION PRODUCTION INPUTS PRODUCTIVE ASSETS PRODUCTIVITIES PRODUCTIVITY PRODUCTIVITY GROWTH PRODUCTIVITY INCREASES PROGRAM EVALUATIONS PROVISION OF GOODS PUBLIC PUBLIC BUDGETING PUBLIC BUDGETS PUBLIC CAPITAL PUBLIC CONSUMPTION PUBLIC DEBT PUBLIC DEBT MANAGEMENT PUBLIC EXPENDITURE PUBLIC EXPENDITURE MANAGEMENT PUBLIC FINANCES PUBLIC FUNDS PUBLIC INVESTMENT PUBLIC INVESTMENT IN INFRASTRUCTURE PUBLIC REVENUE PUBLIC SCHOOLS PUBLIC SECTOR PUBLIC SECTORS PUBLIC SERVICE PUBLIC SPENDING PUBLIC TRANSPORT RATE OF RETURN RATES OF RETURN RECURRENT COST RECURRENT COSTS RECURRENT EXPENDITURES RENTS RETURNS RISK AVERSE RISK AVERSION RISK TOLERANCE ROADS RULE OF LAW SALES SAVINGS SECONDARY SCHOOL SECONDARY SCHOOLS SIDE EFFECTS SOCIAL BENEFIT STAKEHOLDER STAKEHOLDERS STOCKS STREETS SUBSTITUTION EFFECT TAX TAX COLLECTIONS TAX RATE TAX REVENUE TAX SYSTEM TAXATION TOTAL FACTOR PRODUCTIVITY TOTAL WELFARE COST TRADE POLICY TRADING TRADING SYSTEM TRANSITION ECONOMIES TREASURY USER CHARGES UTILITIES VOUCHER PROGRAM VOUCHER PROGRAMS WAGE WAGE EXPENDITURES WEALTH WELFARE LOSS WORTH Given that public spending will have a positive impact on GDP if the benefits exceed the marginal cost of public funds, the present paper deals with measuring costs and benefits of public spending. The paper discusses one cost seldom considered in the literature and in policy debates, namely, the volatility derived from additional public spending. The paper identifies a relationship between public spending volatility and consumption volatility, which implies a direct welfare loss to society. This loss is substantial in developing countries, estimated at 8 percent of consumption. If welfare losses due to volatility are this sizeable, then measuring the benefits of public spending is critical. Gauging benefits based on macro aggregate data requires three caveats: a) considering of the impact of the funding (taxation) required for the additional public spending; b) differentiating between investment and capital formation; c) allowing for heterogeneous response of output to different types of capital and differences in network development. It is essential to go beyond country-specificity to project-level evaluation of the benefits and costs of public projects. From the micro viewpoint, the rate of return of a project must exceed the marginal cost of public funds, determined by tax levels and structure. Credible evaluations require microeconomic evidence and careful specification of counterfactuals. On this, the impact evaluation literature and methods play a critical role. From individual project evaluation, the analyst must contemplate the general equilibrium impacts. In general, the paper advocates for project evaluation as a central piece of any development platform. By increasing the efficiency of public spending, the government can permanently increase the rate of productivity growth and, hence, affect the growth rate of GDP. 2012-06-06T22:08:24Z 2012-06-06T22:08:24Z 2007-10 http://documents.worldbank.org/curated/en/2007/10/8466839/public-expenditure-growth http://hdl.handle.net/10986/7366 English Policy Research Working Paper; No. 4372 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |