Arbeitspapier

Excess burden and the cost of inefficiency in public services provision

In this paper we revisit the literature on the economic consequences from inefficiency in public services provision. Following Dupuit (1844) and Pigou (1947) we argue that it is important to take the financing side explicitly into account. The fact that public expenditure financing must rely on distortional taxation implies that both direct and indirect costs are relevant when estimating the economic impacts of inefficiency in public services provision. Using Hicks’ compensating variation (following Diamond and McFadden (1974) and Auerbach (1985)) we show that these magnification mechanisms are not only conceptually relevant, they are also important from a quantitative point of view. Specifically, we rely on a range of estimates of public sector efficiency (from Afonso, Schuknecht and Tanzi (2005, 2006)) to illustrate numerically that the relative importance of indirect costs of public sector provision inefficiency, linked to financing through distortional taxation increases with the magnitude of the inefficiency.

Sprache
Englisch

Erschienen in
Series: ECB Working Paper ; No. 601

Klassifikation
Wirtschaft
Consumer Economics: Theory
Fiscal Policy
Taxation and Subsidies: Efficiency; Optimal Taxation
National Government Expenditures and Related Policies: General
Thema
excess burden
Government efficiency
spending
taxes
Öffentlicher Sektor
Allokationseffizienz
Excess Burden
Öffentliche Ausgaben
Theorie
Welt

Ereignis
Geistige Schöpfung
(wer)
Afonso, António
Gaspar, Vítor
Ereignis
Veröffentlichung
(wer)
European Central Bank (ECB)
(wo)
Frankfurt a. M.
(wann)
2006

Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Afonso, António
  • Gaspar, Vítor
  • European Central Bank (ECB)

Entstanden

  • 2006

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