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Public sector efficiency in the design of a euro-area social benefit scheme

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  • Olanubi, Sijuola Orioye
  • Osode, Oluwanbepelumi Esther
  • Adegboye, Abiodun Adewale

Abstract

This study examines the importance of public sector efficiency in the design of a euro area-wide social benefit scheme. Our results reveal large-scale inefficiencies in the use of funds allocated to the scheme during the great recession and euro area sovereign debt crisis that followed, with member states wasting on average 34.6% of funds allocated to it. We therefore propose that to ensure the smooth functioning of the scheme, the fiscal union will first of all have to strengthen it at the national level by improving efficiency in the use of funds by governments. We show that this can be achieved by providing a framework for the transfer of the “critical success factors” in the policies implemented by the most efficient administrations. Furthermore, we show how public sector efficiency considerations can help ameliorate the problem of moral hazard associated with a centralized insurance scheme.

Suggested Citation

  • Olanubi, Sijuola Orioye & Osode, Oluwanbepelumi Esther & Adegboye, Abiodun Adewale, 2020. "Public sector efficiency in the design of a euro-area social benefit scheme," Journal of Policy Modeling, Elsevier, vol. 42(3), pages 615-627.
    • Handle: RePEc:eee:jpolmo:v:42:y:2020:i:3:p:615-627
    DOI: 10.1016/j.jpolmod.2019.10.001
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    More about this item

    Keywords

    Fiscal union; Public sector efficiency; Social benefit scheme; Policy transfer; European fiscal integration;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements

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