Public Expenditure and Growth

Herrera, Santiago

World Bank, Washington, DC

关键词: ABSENTEEISM;    ACCOUNTING;    ADMINISTRATIVE COSTS;    ADVERSE EFFECT;    AGGREGATE COST;   

DOI  :  10.1596/1813-9450-4372
RP-ID  :  WPS4372

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Given that public spending will have apositive impact on GDP if the benefits exceed the marginalcost of public funds, the present paper deals with measuringcosts and benefits of public spending.The paper discussesone cost seldom considered in the literature and in policydebates, namely, the volatility derived from additionalpublic spending. The paper identifies a relationship betweenpublic spending volatility and consumption volatility, whichimplies a direct welfare loss to society. This loss issubstantial in developing countries, estimated at 8 percentof consumption. If welfare losses due to volatility are thissizeable, then measuring the benefits of public spending iscritical. Gauging benefits based on macro aggregate datarequires three caveats: a) considering of the impact of thefunding (taxation) required for the additional publicspending; b) differentiating between investment and capitalformation; c) allowing for heterogeneous response of outputto different types of capital and differences in networkdevelopment. It is essential to go beyondcountry-specificity to project-level evaluation of thebenefits and costs of public projects.From the microviewpoint, the rate of return of a project must exceed themarginal cost of public funds, determined by tax levels andstructure.Credible evaluations require microeconomicevidence and careful specification of counterfactuals. Onthis, the impact evaluation literature and methods play acritical role. From individual project evaluation, theanalyst must contemplate the general equilibrium impacts.In general, the paper advocates for project evaluation as acentral piece of any development platform. By increasing theefficiency of public spending, the government canpermanently increase the rate of productivity growth and,hence, affect the growth rate of GDP.