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On the Use of Budgetary Norms as a Tool for Fiscal Management

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Abstract

The use of expenditure needs, sometimes referred to as "expenditure norms", "budgetary norms", or "minimum standards", is important in the formulation of budgets and, especially, in the establishment of transfer and grant formulae. Minimum standards are also used by central governments to control expenditure policies of subnational governments, often with the goal of protecting and enhancing national priorities. However, despite the continued wide use of expenditure norms, there are many aspects there are not fully understood. Perhaps the most basic issue is the actual construction of the norms. In this paper we examine what some countries have been doing to bring a more accurate assessment of their expenditure needs. We argue that the broad trend across most all countries is for budget controls and procedures to become less complex, and this tendency is observed throughout the assessment of expenditure needs process, including the design of grant formulae. Indeed, perhaps the major trend is to use simpler methods of expenditure needs where rules are clear for every component of the process and for all participants in the process. The consensus also appears to be that traditional budget processes should place a greater emphasis on the outcomes achieved by government spending units and the evaluation of managers and personnel according to these outcomes rather than controlling ex ante expenditure control, and that expenditure needs assessment can help in this process.

Suggested Citation

  • James Alm & Jorge Martinez-Vazquez, 2002. "On the Use of Budgetary Norms as a Tool for Fiscal Management," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0215, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  • Handle: RePEc:ays:ispwps:paper0215
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    File URL: http://icepp.gsu.edu/files/2015/03/ispwp0215.pdf
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    References listed on IDEAS

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    1. Anwar Shah, 1996. "A Fiscal Need Approach to Equalization," Canadian Public Policy, University of Toronto Press, vol. 22(2), pages 99-115, June.
    2. Bambang Brodjonegoro & Jorge Martinez-Vazquez, 2004. "An Analysis of Indonesia's Transfer System: Recent Performance and Future Prospects," Chapters,in: Reforming Intergovernmental Fiscal Relations and the Rebuilding of Indonesia, chapter 8 Edward Elgar Publishing.
    3. Borooah, V K & Smyth, M F, 1993. "The Allocation of Public Expenditure between the Countries of the United Kingdom: An Application of the Error Correction Mechanism," Scottish Journal of Political Economy, Scottish Economic Society, vol. 40(3), pages 295-310, August.
    4. Roy Bahl, 1999. "Intergovernmental Fiscal Relations in Leningrad Region," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper9902, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    5. Charles E. McLure, Jr. & Jorge Martinez-Vazquez, 1998. "Intergovernmental Fiscal Relations in Vietnam," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper9802, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    6. Era Dabla-Norris & Jorge Martinez-Vazquez & John Norregaard, 2000. "Making Decentralization Work: The Case of Russia, Ukraine, and Kazakhstan," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0009, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    7. Richard Jackman & John Papadachi, 1981. "Local authority education expenditure in England and Wales: Why standards differ and the impact of government grants," Public Choice, Springer, vol. 36(3), pages 425-439, January.
    8. Joao do Carmo Oliveira & Jorge Martinez-Vasquez, 2001. "Czech Republic : Intergovernmental Fiscal Relations in the Transition," World Bank Publications, The World Bank, number 14027.
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    Cited by:

    1. Jorge Martinez-Vazquez & Cristian SepĂșlveda, 2007. "The Municipal Transfer System in Nicaragua:Evaluation and Proposals for Reform," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0708, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. James Alm & Jorge Martinez-Vazquez *, 2015. "Re-designing equalization transfers: an application to South Africa provincial equitable share," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(1), pages 1-22, January-M.
    3. Jameson Boex, 2003. "The incidence of local government allocations in Tanzania," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0311, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    4. Sen, Tapas K. & Trebesch, Christoph, 2004. "Use of socio-economic criteria for intergovernmental transfers: The case of India," Working Papers 04/10, National Institute of Public Finance and Policy.

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    Keywords

    budget; expenditures; fiscal management;

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