Public funds are money and revenue that governments share or spend in public sector in order to maintain and develop industries and public welfare. The funds are raised among others by the tax system at the administration level. The term public funds describes also bonds and other securities of the country. They might cover multiple aspects of investment, i.e.:
- national safety
- health sector
To make the system of public funds management more efficient and society-friendly, it is crucial to achieve an effective cooperation between public and private sector (Nagy 2018, p. 187.). Nowadays the companies tend to reinforce the steps of governments by promote their cause-related policies. In many cases the objectives pursued by them prove to coincide with the aims set by the governmental administration. In such areas it is possible and beneficial for both sides to cooperate and so serve the society. Examples of such partnership areas are often: health, culture and education.
Marginal cost of public funds
The marginal cost of public funds is an aspect strictly connected with public funds. It describes the relation between tax rate and public welfare index, allowing the economies to measure, how changes of tax system influence societies (Dahlby, Ferede 2011, p.1.). On one hand, raising the tax level very often could affect the society by reducing the real value of their wealth, but on the other hand – allows the government to invest more on account of public welfare. Maintaining the right balance is a challenge the industries face all the time. In a context of constant changes in the economy the marginal cost of public funds may vary according to many aspects of market volatility (Engel, Fischer, Galetovic 2013, p. 39). For this reason the governments are in constant need for complex forecasting, calculation and planning processes. Depending on the country, the definition of marginal cost calculated for public funds may contain various currencies, with American dollar and Euro being the most often used in order to deliver objective and comparable results and differences between countries or regions (Barrios, Pycroft, Saveyn, 2013, p. 19.).
Transparency of public funds
Transparency of public funds disposition is a key factor the governments are endavoring to achieve (Nagy 2018, p. 184). The aspect of transparency indicates how clear and intelligible the system is. The more transparent the management of public funds is, the better the control over the actions of administration sector could be. It prevents from waste of public money and fraud attempts.
- Barrios, S., Pycroft, J., & Saveyn, B. (2013). The marginal cost of public funds in the EU: the case of labour versus green taxes. „Fiscal Policy and Growth”, 19-32.
- Capuano, C., & De Feo, G. (2010). Privatization in oligopoly: the impact of the shadow cost of public funds. „Rivista italiana degli economisti”, 15(2), 2-23.
- Dahlby, B., & Ferede, E. (2011). What does it cost society to raise a dollar of tax revenue? The marginal cost of public funds „The Marginal Cost of Public Funds”, 324, 1-15.
- Engel, E., Fischer, R., & Galetovic, A. (2013). The basic public finance of public–private partnerships. „Journal of the European Economic Association”, 11(1), 2-52.
- Klonner, S., & Oldiges, C. (2014). Safety net for India's poor or waste of public funds? Poverty and welfare in the wake of the world's largest job guarantee program, „Discussion Paper Series”, no. 564, 1-4.
- Nagy, C. (2018). Public Sector and Public Funds. Conceptual Approach and Legislation. Analele Universitatii “Eftimie Murgu” Resita. Fascicola II. Studii Economice, (25), 182–191.
Author: Joanna Możdżeń