How does the composition of public spending matter?
Public spending has effects which are complex to trace and difficult to quantify. But the composition of public expenditure has become the key instrument by which development agencies seek to promote economic development. In recent years, the development assistance to heavily indebted poor countries (HIPCs) hasbeen made conditional on increased expenditure on categories that are thought to be"pro-poor". This paper responds to the growing concern being expressed about the conceptual foundations and the empirical basis for the belief that poverty can be reduced through targeted public spending. While it is widely accepted that growth and redistribution are important sources of reduction in absolute poverty, a review of the literature confirms the lack of an appropriate theoretical framework for assessing the impact of public spending on growth as well as poverty. There is a need to combine principles of both public economics and growth theory to develop appropriate theoretical guidance for public expenditure policy. This paper identifies a number of approaches that are beginning to address this gap. Building on these approaches, it proposes a framework that has its foundation in a broadly articulated development strategy and its economic goals such as growth, equity, and poverty reduction. It recommends the use of public economics principles to clarify the roles of the private and public sectors and to recognize the complementarity of spending, taxation, and regulatory instruments available to affect public policy. With regard to the impact of any given type of public spending, policy recommendations must be tailored to countries and be based on empirical analysis that takes account of the lags and leads in their effects on equity and growth and ultimately on poverty. The paper sketches out such a framework as the first step in what will have to be a longer-term research agenda to provide theoretically and empirically robust and verifiable guidance to public spending policy.
|Date of creation:||01 Mar 2005|
|Date of revision:|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Agénor, Pierre-Richard & Bayraktar, Nihal & El Aynaoui, Karim, 2008.
"Roads out of poverty? Assessing the links between aid, public investment, growth, and poverty reduction,"
Journal of Development Economics,
Elsevier, vol. 86(2), pages 277-295, June.
- Agenor, Pierre-Richard & Bayraktar, Nihal & El Aynaoui, Karim, 2005. "Roads out of poverty? assessing the links between aid, public investment, growth, and poverty reduction," Policy Research Working Paper Series 3490, The World Bank.
- Pierre Richard AGÉNOR & Nihal BAYRAKTAR & Karim EL AYNAOUI, . "Roads out of Poverty? Assessing the Link between Aid, Public Investment, Growth and Poverty Reduction," EcoMod2004 330600003, EcoMod.
- Ravallion, Martin, 2005.
"On Measuring Aggregate "Social Efficiency.","
Economic Development and Cultural Change,
University of Chicago Press, vol. 53(2), pages 273-92, January.
- Belli, Pedro, 1996. "Is economic analysis of projects still useful?," Policy Research Working Paper Series 1689, The World Bank.
- Niloy Bose & M. Emranul Haque & Denise R. Osborn, 2007. "Public Expenditure And Economic Growth: A Disaggregated Analysis For Developing Countries," Manchester School, University of Manchester, vol. 75(5), pages 533-556, 09.
- Lipton, Michael & Ravallion, Martin, 1995.
"Poverty and policy,"
Handbook of Development Economics,
in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 41, pages 2551-2657
- Mackinnon, John & Reinikka, Ritva, 2000. "Lessons from Uganda on strategies to fight poverty," Policy Research Working Paper Series 2440, The World Bank.
- Canning, David & Bennathan, Esra, 2000. "The social rate of return on infrastructure investments," Policy Research Working Paper Series 2390, The World Bank.
- T. Paul Schultz, 2002.
"Wage Gains Associated with Height as a Form of Health Human Capital,"
American Economic Review,
American Economic Association, vol. 92(2), pages 349-353, May.
- T. Paul Schultz, 2002. "Wage Gains Associated with Height as a Form of Health Human Capital," Working Papers 841, Economic Growth Center, Yale University.
- Raghbendra Jha & Bagala Biswal & Urvashi D. Biswal, 2001.
"An Empirical Analysis of the Impact of Public Expenditures on Education and Health on Poverty in Indian States,"
ASARC Working Papers
2001-05, The Australian National University, Australia South Asia Research Centre.
- Raghbendra Jha & Bagala Biswal & Urvashi D. Biswal, 2001. "An Empirical Analysis of the Impact of Public Expenditures on Education and Health on Poverty in Indian States," Working Papers 998, Queen's University, Department of Economics.
- Angus Deaton, 2002.
"Health, inequality, and economic development,"
270, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Health and Wellbeing..
- Angus Deaton, 2001. "Health, Inequality, and Economic Development," NBER Working Papers 8318, National Bureau of Economic Research, Inc.
- Angus Deaton, 2002. "Health, inequality, and economic development," Working Papers 209, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
- Deaton, A., 2001. "Health, Inequality, and Economic Development," Papers 200, Princeton, Woodrow Wilson School - Development Studies.
- Angus Deaton, 2016. "Health, Inequality and Economic Development," Working Papers id:8791, eSocialSciences.
- Jos Mooij & S. Mahendra Dev, 2004. "Social Sector Priorities: An Analysis of Budgets and Expenditures in India in the 1990s," Development Policy Review, Overseas Development Institute, vol. 22(1), pages 97-120, 01.
- Shenggen Fan & Peter Hazell, 2001. "Returns to Public Investments in the Less-Favored Areas of India and China," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1217-1222.
- François Bourguignon & Maurizio Bussolo & Luiz A. Pereira da Silva, 2008. "The Impact of Macroeconomic Policies on Poverty and Income Distribution : Macro-Micro Evaluation Techniques and Tools," World Bank Publications, The World Bank, number 6586, August.
- Marianne Fay & Danny Leipziger & Quentin Wodon & Tito Yepes, 2003. "Achieving the Millennium Development Goals : The role of infrastructure," Policy Research Working Paper Series 3163, The World Bank.
- Shenggen Fan & Xiaobo Zhang, 2008.
"Public Expenditure, Growth and Poverty Reduction in Rural Uganda,"
African Development Review,
African Development Bank, vol. 20(3), pages 466-496.
- Fan, Shenggen & Zhang, Xiaobo & Rao, Neetha, 2004. "Public expenditure, growth, and poverty reduction in rural Uganda," DSGD discussion papers 4, International Food Policy Research Institute (IFPRI).
- Paul Collier & Stefan Dercon & John Mackinnon, 2002.
"Density versus Quality in Health Care Provision: Using Household Data to Make Budgetary Choices in Ethiopia,"
Economics Series Working Papers
WPS/2002-17, University of Oxford, Department of Economics.
- Paul Collier & Stefan Dercon & John Mackinnon, 2002. "Density versus Quality in Health Care Provision: Using Household Data to Make Budgetary Choices in Ethiopia," World Bank Economic Review, World Bank Group, vol. 16(3), pages 425-448, December.
- Paul Collier & Stefan Dercon & John Mackinnon, 2002. "Density versus quality in health care provision: Using household data to make budgetary choices in Ethiopia," CSAE Working Paper Series 2002-17, Centre for the Study of African Economies, University of Oxford.
- Paul Collier & Stefan Dercon & John Mackinnon, 2004. "Density versus Quality in Health Care Provision: Using Household Data to Make Budgetary Choices in Ethiopia," Development and Comp Systems 0409052, EconWPA.
- Paul Atkinson & Paul van den Noord, 2001. "Managing Public Expenditure: Some Emerging Policy Issues and A Framework for Analysis," OECD Economics Department Working Papers 285, OECD Publishing.
- Tony Killick, 2004. "Politics, Evidence and the New Aid Agenda," Development Policy Review, Overseas Development Institute, vol. 22(1), pages 5-29, 01.
- Dollar, David & Kraay, Aart, 2001.
"Growth is good for the poor,"
Policy Research Working Paper Series
2587, The World Bank.
- Ajwad, Mohamed Ihsan & Wodon, Quentin, 2007. "Do local Governments maximize access rates to public services across areas?: A test based on marginal benefit incidence analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(2), pages 242-260, May.
- Karuna Gomanee & Sourafel Girma & Oliver Morrissey, 2006.
"Aid, Public Spending and Human Welfare: Evidence from Quantile Regressions,"
- Karuna Gomanee & Sourafel Girma & Oliver Morrissey, 2005. "Aid, public spending and human welfare: evidence from quantile regressions," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(3), pages 299-309.
- Lanjouw, Peter & Ravallion, Martin, 1999. "Benefit Incidence, Public Spending Reforms, and the Timing of Program Capture," World Bank Economic Review, World Bank Group, vol. 13(2), pages 257-73, May.
- Musgrave, R.A., 1985. "A brief history of fiscal doctrine," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 1, pages 1-59 Elsevier.
- Shantayanan Devarajan & Vinaya Swaroop & Heng-fu Zou, 1996.
"The composition of public expenditure and economic growth,"
CEMA Working Papers
77, China Economics and Management Academy, Central University of Finance and Economics.
- Devarajan, Shantayanan & Swaroop, Vinaya & Heng-fu, Zou, 1996. "The composition of public expenditure and economic growth," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 313-344, April.
- Abhijit V. Banerjee & Ruimin He, 2003. "The World Bank of the Future," American Economic Review, American Economic Association, vol. 93(2), pages 39-44, May.
- Jung, Hong-Sang & Thorbecke, Erik, 2003. "The impact of public education expenditure on human capital, growth, and poverty in Tanzania and Zambia: a general equilibrium approach," Journal of Policy Modeling, Elsevier, vol. 25(8), pages 701-725, November.
- John Matovu & Era Dabla-Norris, 2002. "Composition of Government Expenditures and Demand for Education in Developing Countries," IMF Working Papers 02/78, International Monetary Fund.
- Schultz, T. Paul, 1997. "Assessing the productive benefits of nutrition and health: An integrated human capital approach," Journal of Econometrics, Elsevier, vol. 77(1), pages 141-158, March.
- Lopez, Ramon & Thomas, Vinod & Yan Wang, 1998. "Addressing the education puzzle : the distribution of education and economic reform," Policy Research Working Paper Series 2031, The World Bank.
- Gupta, Sanjeev & Clements, Benedict & Baldacci, Emanuele & Mulas-Granados, Carlos, 2005. "Fiscal policy, expenditure composition, and growth in low-income countries," Journal of International Money and Finance, Elsevier, vol. 24(3), pages 441-463, April.
- Paul Mosley & John Hudson & Arjan Verschoor, 2004. "Aid, Poverty Reduction and the 'New Conditionality'," Economic Journal, Royal Economic Society, vol. 114(496), pages F217-F243, 06.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:3555. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.