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Putting it off for later

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Abstract

Many government departments around the world exhibit heightened end of scal year spending. The UK and Northern Ireland governments are no exception spending around 1.91 and 3.06 times more on capital in the final month of the fiscal year than the average month. These spending spikes present a problem for policy makers due to their tendency to result in lower quality spending. A model is presented with procrastination as the driver of heightened end of year spending. Departmental performance is measured on a fiscal year basis and hence there is an incentive to delay spending effort in spending money until later in the fiscal year. A new technique of time variant budgetary taxes are suggested for disincentivising heightened end of year spending and increasing spending efficiency. The model is calibrated to Northern Ireland government spending data with the finding that time variant budgetary taxes can improve the value of government spending by more than 10%.

Suggested Citation

  • Stuart Baumann, 2015. "Putting it off for later," ESE Discussion Papers 260, Edinburgh School of Economics, University of Edinburgh.
  • Handle: RePEc:edn:esedps:260
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    File URL: http://www.econ.ed.ac.uk/papers/id260_esedps.pdf
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    References listed on IDEAS

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    1. Unknown, 2008. "New Generation of Standards - Executive Summary," 2008 NAAMIC Workshop V: New Generation of NAFTA Standards 163903, North American Agrifood Market Integration Consortium (NAAMIC).
    2. Jeffrey B. Liebman & Neale Mahoney, 2013. "Do Expiring Budgets Lead to Wasteful Year-End Spending? Evidence from Federal Procurement," NBER Working Papers 19481, National Bureau of Economic Research, Inc.
    3. Fitzenberger, Bernd & Furdas, Marina & Sajons, Christoph, 2016. "End-of-year spending and the long-run employment effects of training programs for the unemployed," ZEW Discussion Papers 16-084, ZEW - Leibniz Centre for European Economic Research.
    4. Saul Pleeter & John T. Warner, 2001. "The Personal Discount Rate: Evidence from Military Downsizing Programs," American Economic Review, American Economic Association, vol. 91(1), pages 33-53, March.
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    Cited by:

    1. Kortelainen, Mika & Lapointe, Simon, 2019. "Inefficiencies in the Financing of Finnish County Governments - Lessons from the Literature on Fiscal Federalism," Research Reports 188, VATT Institute for Economic Research.

    More about this item

    Keywords

    Government spending; fiscal year distortions;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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