Government expenditure: Difference between revisions
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Those two examples have a huge impact on the long run of a economy 201/202 | Those two examples have a huge impact on the long run of a economy 201/202 | ||
==Government spending in the IS-LM Model== | |||
If the government decides to increase their spending, that's a kind of a extended fiscal policy. | |||
In the classical IS-LM Model the IS Curve shifts to the right due this action. | |||
Then you can obtain some consequences. First, the income of the households increases. The overall demand increases then too. That means the demand for money is also higher. Second, the interest rates are increasing, because to keep balance through the first effect in our model. | |||
page 99 ff | |||
==Impact of Globalization on the composition of Government expenditures== | ==Impact of Globalization on the composition of Government expenditures== | ||
Revision as of 14:20, 6 November 2022
Definition Government expenditures Means all the expenditures of the public sector from a state. The definition includes different sectors: it is an addition of the consumption of the government, investment, interest expenses, and expenditures for subsidies. Seite 229/233 world bank Gleichung G=
FOLIE 181 world bank: The government has a really big impact on the economy, because of their size. With the use of high taxes and subsidies there is a benchmark for the control of the economy. High budget deficits make it harder to control the money supply and thus the probability of a higher inflation.
Total expenditure of the government
This definition includes current and capital expenditures but without lending and the corresponding repayments.
- Goods and services: That means all governmental payments for goods and services, could be for example the wage for workers.
- Wages and salaries: only defines the cash payments in return for services before the subtraction of taxes.
- Interest payments: payments made to sectors for borrowing money. It doesn’t include governmental loans.
- Subsidies and other transfers include all non-repayable transfers to public and private companies. in addition, it also includes the costs of covering liquidity deficits.
- Capital expenditure: This defines as an increase through fixed capital assets, property, intangible assets, government inventories, and non-military and non-financial assets.
World bamk seite 233
Examples of government expenditures
One category mentains thinghs like infrastructure, that means roads, airports, R&D etc. Those exampels improve the output. The other category includes things like education to achieve a better technology development. Glomm 1997 productive government expenditures and lon run growth page 201/202
Those two examples have a huge impact on the long run of a economy 201/202
Government spending in the IS-LM Model
If the government decides to increase their spending, that's a kind of a extended fiscal policy. In the classical IS-LM Model the IS Curve shifts to the right due this action. Then you can obtain some consequences. First, the income of the households increases. The overall demand increases then too. That means the demand for money is also higher. Second, the interest rates are increasing, because to keep balance through the first effect in our model.
page 99 ff
Impact of Globalization on the composition of Government expenditures
Different kinds of government expenditures react differently to globalization. Through globalization, the governments got more pressure and decide to concentrate more on capital expenditures. As a result, it shows that using econometric analysis, there is no impact on the composition of government expenditures through globalization. Literature shows three possible explanations for this result. The efficiency and compensation effects could neutralize each other. Additionally, there could be indirect effects between the expenditure categories. The last reason the effects of globalization may not exist is because of overstating the topic. The impact of globalization on the composition of government expenditures: Evidence from panel data Axel Dreher · Jan-Egbert Sturm · Heinrich W. Ursprung
Government expenditures in Poland
If you compare developing and high-income economies, one of them is Poland, the bigger part of the government expenditure is used for subsidies and other ongoing transfers. The country with the highest amount of this expenditure is the Czech Republic, with approximately 74%. Followed by Poland with a percentage of about 70. Military expenditures percentage of government expenditures: If you compare the years 1992 and 2001 there was a reduction of this percentage. 1992 the part was about 5.5% and reduced to 5.3% eight years later. The world bank 2003 page 233
Footnotes
References
- Dreher, A., Sturm, JE. & Ursprung, H.W. (2007), The impact of globalization on the composition of government expenditures: Evidence from panel data, Public Choice.
- Gloom G., Ravikumar B. (1997), Productive government expenditures and long-run growth, Journal of Economics Dynamics and Control.
- World Bank, (2003), World Development Indicators 2003, World Bank.
Author: Annamarie Dietz
