Does public sector efficiency matter? Revisiting the relation between fiscal size and economic growth in a world sample

Angelopoulos, Konstantinos; Philippopoulos, Apostolis; Tsionas, Efthymios G.

doi:10.1007/s11127-008-9324-8

“…Again the qualitative effects of reforms do not depend on this. 12 See Afonso et al (2005) and Angelopoulos et al (2008) for computations of public sector efficiency in various countries and various policy areas. On the other hand, see Pestieau (2007) and Sørensen (2014) for a critical review and methodology issues.…”

Section: Policy Reforms Studiedmentioning

confidence: 99%

Incentives to Work and Performance in the Public Sector

Economides¹,

Philippopoulos²,

Varthalitis³

2016

Public Sector Economics and the Need for Reforms

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. An electronic version of the paper may be downloaded Terms of use: Documents in EconStor may• from the SSRN website:www. SSRN.com • from the RePEc website:www. RePEc.org • from the CESifo website:T www. CESifo-group.org/wpT CESifo Working Paper No. 5193 Incentives to Work and Performance in the Public Sector Abstract This paper develops a dynamic general equilibrium model with three distinct social groups, capitalists, private workers and public employees. After solving for the status quo equilibrium, which can mimic the advantages of employment in the public sector in most EU countries, the paper looks for policy reforms that can improve work incentives, and hence enhance productive efficiency, in the public sector. We focus on reforms aiming to establish parity between work conditions in the public and the private sector.JEL-Code: D580.Keywords: dynamic general equilibrium models, efficiency, equity, employment, incentives. George Economides* Athens University of Economics and BusinessSchool In turn, departing from this status quo solution, we study the qualitative and quantitative implications of a number of reforms that aim to strengthen the incentive to work and, hence, improve productive efficiency (measured as an output-to-input ratio) in the public sector. As said, we focus on reforms that establish parity between work conditions in the public and the private sector. In particular, in light of the above empirical evidence, and similarly to the situation in the private sector, we introduce job insecurity in the public sector, link the public wage rate to a measure of labor productivity and change the mix between wages and transfers in favor of the former.We study both the aggregate and distributional implications of these reforms.Our main results are as follows. Introducing job insecurity, like in the private sector, seems to improve the work incentives of public employees but the importance of this reform is negligible quantitatively. Cutting public wages (for instance, by linking the public wage rate to a measure of labor productivity) deteriorates the work incentives of public employees and this leads to a drop in public output and to trivial effects on the rest of the economy. By contrast, what seems to really help the aggregate economy is a policy reform that equalizes the ratio of non-labor transfers to the wage rate in the two sectors and, at the same time, uses the efficiency savingsbeing enjoyed by the switch to a more efficien...

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“…Instead of being financed by building up debt, the increase in unproductive expenditures is explicitly financed by revenues. A complementary explanation is given by Angelopoulos et al (2008), who show that an increase of government size may be growth promoting when public efficiency is high. This specific result of S1 is further analyzed in S4, where we see that the choice of tax instrument, to pay for these unproductive expenditures, is very important.…”

Section: Direct Effects Of Fiscal Policymentioning

confidence: 99%

Fiscal policy and TFP in the OECD: measuring direct and indirect effects

Everaert

¹

,

Heylen

²

,

Schoonackers

³

2014

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Statement of purpose:The purpose of these working papers is to promote the circulation of research results (Research Series) and analytical studies (Documents Series) made within the National Bank of Belgium or presented by external economists in seminars, conferences and conventions organised by the Bank. The aim is therefore to provide a platform for discussion. The opinions expressed are strictly those of the authors and do not necessarily reflect the views of the National Bank of Belgium. JEL classification: C31, C33, E62, O38 Orders

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“…This literature's motivation is that improved technical efficiency can be utilized for better or more productive services, or -especially in times of pressing fiscal consolidation needs -to a reduction of government resource use and overall tax burden. In line with this idea, Angelopoulos et al (2008) find that what really matters for economic growth is not government size per se, but the country's size-efficiency mix.…”

Section: Relevant Strands In the Literaturementioning

confidence: 85%

“…Inefficiencies in public administration have been identified as a bottleneck for firm performance and competitiveness (Austrian Institute of Economic Research, 2012). Based on a large country sample, Angelopoulos et al (2008) show that the intensively debated relation between government size and economic growth is conditional on the efficiency of government spending. And Heylen et al (2013) find evidence that attempts for budget consolidation are likely to be more successful when consolidation programs are adopted by a more efficient government apparatus.…”

Section: Introductionmentioning

confidence: 99%

Reforming the Public Administration: The Role of Crisis and the Power of Bureaucracy

Asatryan

¹

,

Heinemann

²

,

Pitlik

³

2015

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe need to balance austerity with growth policies has put government efficiency high on the economic policy agenda in Europe. Administrative reforms which boost the efficiency of the administration can alleviate the trade-off between consolidation and public service provision. Against such backdrop, this study explores the determinants of efficiency enhancing public administration reforms for a panel of EU countries using a novel reform indicator. The findings support the political-economic reasoning: an economic and fiscal crisis is a potent catalyst for reforms, but a powerful bureaucracy effectively constrains the opportunities of a crisis to promote this particular type of reform. Furthermore, there is evidence for horizontal learning from other EU countries, and for vertical learning associated with a particular type of EU transfers. JEL codes: H83, H11, D73

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Does public sector efficiency matter? Revisiting the relation between fiscal size and economic growth in a world sample

Abstract: Fiscal policy, Government efficiency, Growth, H1, E6, 04,

Cited by 90 publications

References 23 publications

Incentives to Work and Performance in the Public Sector

Incentives to Work and Performance in the Public Sector

Fiscal policy and TFP in the OECD: measuring direct and indirect effects

Reforming the Public Administration: The Role of Crisis and the Power of Bureaucracy

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