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Field adjustments in transition economies : social transfers and the efficiency of public spending - a comparison with OECD countries

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  • Fakin, Barbara
  • de Crombrugghe, Alain

Abstract

Despite a dramatic shift away from subsidies in the early years of transition, the countries of Central Europe still show signs of unsuccessful fiscal adjustment, insufficient deficit reduction, and loose spending policy. High social transfers and low efficiency of government spending remain two challenges of fiscal adjustment and long-term sustainability of budgetary policy choices. A cross-country regression analysis shows that the problems with high social-security outlays are largely the result of loose eligibility criteria (many pensions go to early retirees) under current state pay-as-you-go pension systems - and not so much to old populations or high replacement rates. The authors suggest that transition economies should strive for a real social consensus on the reform of future pension rights. The transition to a funded pension system could be financed by a combination of: government debt; proceeds from privatization; and efficiency gains from lowering and/or restructuring government spending in favor of infrastructure, retraining, and market-oriented tertiary education.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1803.

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Date of creation: 31 Jul 1997
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Handle: RePEc:wbk:wbrwps:1803

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Related research

Keywords: Environmental Economics&Policies; Banks&Banking Reform; Economic Theory&Research; Public Sector Economics&Finance; Payment Systems&Infrastructure; Economic Theory&Research; Environmental Economics&Policies; Public Sector Economics&Finance; Banks&Banking Reform; National Governance;

References

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  1. Paul Cashin, 1994. "Government Spending, Taxes, and Economic Growth," IMF Working Papers 94/92, International Monetary Fund.
  2. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  3. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
  4. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  5. Burgess, Robin & Stern, Nicholas, 1993. "Taxation and Development," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 762-830, June.
  6. repec:fth:coluec:754 is not listed on IDEAS
  7. Luca Barbone & Domenico J. Marchetti, 1995. "Transition and the Fiscal Crisis in Central Europe," CASE Network Studies and Analyses 0040, CASE-Center for Social and Economic Research.
  8. Newbery, David M G, 1995. "Tax and Benefit Reform in Central and Eastern Europe," CEPR Discussion Papers 1167, C.E.P.R. Discussion Papers.
  9. Barbone, Luca & Polackova, Hana, 1996. "Public finances and economic transition," Policy Research Working Paper Series 1585, The World Bank.
  10. Breyer, Friedrich & Straub, Martin, 1991. "Welfare effects of unfunded pension systems when labor supply is endogenous," Discussion Papers, Series 1 252, University of Konstanz, Department of Economics.
  11. Jeffrey Sachs & Andrew M. Warner, 1996. "Achieving Rapid Growth in the Transition Economies of Central Europe," CASE Network Studies and Analyses 0073, CASE-Center for Social and Economic Research.
  12. Marek Dabrowski, 1996. "Fiscal Crisis in the Transformation Period: Trends, Stylized Facts and Some Conceptual Problems," CASE Network Studies and Analyses 0072, CASE-Center for Social and Economic Research.
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Citations

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Cited by:
  1. Antonio Afonso & Ludger Schuknecht & Vito Tanzi, 2010. "Public sector efficiency: evidence for new EU member states and emerging markets," Applied Economics, Taylor & Francis Journals, vol. 42(17), pages 2147-2164.
  2. António Afonso & Ludger Schuknecht & Vito Tanzi, 2010. "Income distribution determinants and public spending efficiency," Journal of Economic Inequality, Springer, vol. 8(3), pages 367-389, September.
  3. Afonso, António & Schuknecht, Ludger & Tanzi, Vito, 2003. "Public sector efficiency: an international comparison," Working Paper Series 0242, European Central Bank.
  4. António Afonso & Miguel St. Aubyn, 2005. "Non-parametric approaches to education and health efficiency in OECD countries," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 227-246, November.
  5. Christiaensen, Luc & Scott, Christopher & Wodon, Quentin, 2002. "Cibles du développement et coûts
    [Development targets and costs]
    ," MPRA Paper 10494, University Library of Munich, Germany.
  6. Christiaensen, Luc & Scott, Christopher & Wodon, Quentin, 2002. "Metas y costos del desarrollo
    [Development Targets and Costs]
    ," MPRA Paper 10493, University Library of Munich, Germany.
  7. World Bank, 2003. "Public Expenditure Review for Armenia," World Bank Publications, The World Bank, number 15086, October.
  8. Christiaensen, Luc & Scott, Christopher & Wodon, Quentin, 2002. "Development Targets and Costs," MPRA Paper 12299, University Library of Munich, Germany.
  9. Aleksander Aristovnik, 2013. "Relative Efficiency of Education Expenditures in Eastern Europe: A Non-parametric Approach," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 3(3), pages 4, June.
  10. World Bank, 2003. "Armenia : Public Expenditure Review," World Bank Other Operational Studies 13926, The World Bank.
  11. António Afonso & Miguel St. Aubyn, 2004. "Non-parametric Approaches to Education and Health Expenditure Efficiency in OECD Countries," Working Papers Department of Economics 2004/01, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  12. António Afonso & Sónia Fernandes, 2003. "Efficiency of Local Government Spending: Evidence for the Lisbon Region," Working Papers Department of Economics 2003/09, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  13. Christiaensen, Luc & Scott, Christopher & Wodon, Quentin, 2002. "Задачи Развития И Затраты
    [Development targets and costs]
    ," MPRA Paper 10495, University Library of Munich, Germany.
  14. Ruwan Jayasuriya & Quentin Wodon, 2007. "Efficiency in Improving Health and Education Outcomes: Provincial and State-Level Estimates for Argentina and Mexico," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 22(1), pages 57-97.
  15. Jayasuriya, Ruwan & Wodon, Quentin, 2003. "Measuring and Explaining Country Efficiency in Improving Health and Education Indicators," MPRA Paper 11183, University Library of Munich, Germany.
  16. Antonio Afonso & Carla Scaglioni, 2005. "Public Services Efficiency Provision in Italian Regions: a Non-Parametric Analysis," Working Papers Department of Economics 2005/02, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.

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