PAPER · 2019-12-10 · seminar for their many helpful comments on an earlier version of this...

IMF WORKING PAPER

© 1990 International Monetary Fund

This is a working paper and the author would welcome a n >comments on the present lexl. Ci ta t ions should r e fe r to ;inunpublished manuscr ip t , mentioning the ¡mlhoi and ihcdale of issuance by (he !nierna!ional M o n c i . i f > f und T h eviews expressed arc Ihose of the author and dn not neces-sarily represent those of (he Fund.

WP/90/76 INTERNATIONAL MONETARY FUND

Fiscal Affairs Department

Fiscal Indicators for Economic Growth: An Illusory Search?

Prepared By Jack Diamond*

Authorized for Distribution by A. Premchand

August 1990

Abstract

The search for ways to ensure growth while accomhmodating necessaryexpenditure cuts to correct fiscal imbalances, has often led to theadvocacy of the government own savings (COS) measure as an indicator ofgrowth potential in fiscal adjustment. This paper critically examinesthe rationale of this approach and its implicit assumption of theprimacy of capital expenditure for the growth process. In light of theproblems revealed in the COS approach, the paper explores thepossibility of alternative weighted expenditure indicators andillustrates the proposed technique, employing data from Thailand.

JEL Classification Numbers

110, 121, 320

* The author is indebted to the participants in a departmentalseminar for their many helpful comments on an earlier version of thispaper. He is particularly grateful to Peter Heller for his encourage-ment and comments, but of course, is solely responsible for the paper'scontent.

©International Monetary Fund. Not for Redistribution

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Contents Page

Summary iii

I. Introduction 1

II. The Case for the Government Own Savings Indicator 1

III. Capital Expenditure and Fiscal Adjustment 3

1. Capital expenditures are essential for growth 32. Capital expenditure has been overly discriminated

against 53. Capital expenditure is less inflationary 6

IV. The Government Own Savings Indicator Reconsidered 8

V. Indicators of the Quality of Expenditures 10

1. Data requirements 112. Assigning weights 12

a. Econometric 13b. Microeconomic cost-benefit approach 14c. Ex ante approach 14

VI. Thailand: A Case Study 15

1. Functional weights 152. Economic type weights 15

VII. Concluding Remarks 18

Text Tables

1. ;.Thailand: Comparison of Growth-Weighted Expenditures,1984 and: 1985 (By function) 16

2. Thailand: Comparison of Growth-Weighted Expenditures,-1984 and 1985 (By economic type) 17

Appendix I* 'Tharlahd: Structure of Government Expenditure' 1984 20

Appendix II. Thailand: Structure of Government Expenditure1985 22

References 24


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Summary

It has often been claimed that, in the process of fiscal adjust-ment, setting targets for aggregate spending and ignoring its composi-tion diminish the quality of expenditure and inhibit growth. In turn,this criticism has often been translated into a call for higher levelsof capital spending and for concentrating on the government own savingsmeasure as an indicator of the growth potential in fiscal adjustment.This paper critically examines the case for this measure and highlightsits underlying assumption of the primary role of capital expenditurein economic growth. At the same time, while recognizing the primacyof the overall deficit as a fiscal indicator for the purposes ofdemand management, the paper recognizes that there is an argument forsupplementing the deficit indicator with some indicator of the qualityof fiscal adjustment from the perspective of economic growth.

To this end, the paper develops alternative expenditure indicatorsbased on a system of weighting expenditures by function and economictype. For illustrative purposes, and to reveal the practical problemsinvolved, these indicators are applied to data from Thailand. Thepaper stresses that in devising operational indicators of growthpotential, three main hurdles must be overcome. First, a conceptualframework must be decided on, defining the type of government expendi-ture influencing growth. Second, a system of weights must be devised,reflecting the assumed importance of each type of expenditure. Third,the resulting data requirements must be met if the indicator is to beoperational. Each step is so fraught with ambiguity that it is diffi-cult not to concede that any attempt to describe the fiscal impact ongrowth by a simple index would be more misleading than helpful. Atthe same time, it could be argued that there is scope for devisingsome weighting system, if for no other reason than to correct theimpressionistic, and often imprecise, approaches currently employedby expenditure analysts.


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I. Introduction

A complaint often voiced regarding adjustment programs is that bysetting targets for aggregate spending and ignoring its composition, thequality of expenditure has deteriorated with respect to the growthobjective. In turn, this criticism has often been translated into acall for higher levels of investment spending and, in the absence of anyalternative, for the use of the government own savings (COS) measure asan indicator of growth potential in fiscal adjustment.

An examination of the rationale for the COS measure in Section IIhighlights the crucial assumption of capital expenditure's primary rolein economic growth. Section III critically reviews the case forfavoring capital expenditures as opposed to other governmentexpenditures during fiscal adjustment. In light of this discussion,Section IV reappraises the COS as an indicator to judge fiscalperformance with respect to the economic growth objective. Alternativeweighted expenditure indicators are then developed in Section V. Forillustrative purposes, and to reveal the practical problems involved, inSection VI these indicators are then applied to data from Thailand.Some concluding remarks are contained in Section VII.

II. The Case for the Government Own Savings Indicator

In recent years concern over the poor growth performance ofdeveloping countries has encouraged efforts to accommodate the growthobjective in adjustment programs. _1/ At the same time, disenchantmentwith many programs of fiscal adjustment has often arisen from thesuspicion that economic growth has been unduly inhibited by theexcessive, or even exclusive, emphasis on demand management requirementsof fiscal policy. Certainly, in discussing the appropriateness offiscal measures, a polarization of views is increasingly evident betweenthose emphasizing stabilization and those emphasizing growth. Forexample, in the design of stabilization programs a choice has often tobe made between cutting government current expenditures or cuttinginvestment outlays in order to reach some overall fiscal objective. Asa result, the controversy over growth versus adjustment has typicallybeen centered on the appropriate level of the government's capitalbudget.

To oversimplify, those who view the prime objective of fiscalpolicy as the management of aggregate demand generally place emphasis onaggregate government expenditure and appear reluctant to differentiatebetween current and capital expenditure. From this policy perspective,

_1/ See, for example, International Monetary Fund (1987); Intergovern-mental Group of Twenty-Four on International Monetary Affairs (1987);Carbo, Goldstein, and Khan (1987); Hernandez-Cata (1988); and Khan andMontiel (1988).


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the prime fiscal indicator used to judge the appropriateness of fiscalpolicy has been the overall deficit. So far as short-term demandmanagement is concerned, it is immaterial whether the deficit is reducedby cutting capital or current expenditures. This is inevitably ashort-run view of fiscal adjustment.

In contrast, those who emphasize the importance of the growthobjective tend to emphasize the importance of capital expenditures andof associated recurrent expenditures in maintaining the existing capitalstock. They attack the short-sightedness of fiscal adjustment basedsolely on the requirements of demand management. It is argued thatcurrent outlays associated with wages and entitlements tend to be moredifficult to adjust in the short run. This, it is felt, has led to adisproportionate reliance on cuts in capital expenditures to reachfiscal targets. Although this may lead to an immediate improvement inthe fiscal deficit, it is argued that if these expenditures had takenplace they may have induced desirable supply-side effects. As a result,greater medium-term improvement in the fiscal deficit may have beensacrificed for short-term gains. Moreover, efforts to reach speedilysome overall deficit target may precipitate a counterproductivecurtailment in material and maintenance expenditures with a consequentdeterioration in a country's infrastructure. To undo these effects inthe future, it is argued, will require expensive reconstruction andrehabilitation projects, adding to future fiscal deficits.

Thus while not denying the primacy of the overall deficit as afiscal indicator for the purposes of demand management, it could beargued that there may be a case for supplementing this with someindicator of the quality of fiscal adjustment from the perspective ofeconomic growth. How one would approach the construction of such anindicator forms the basis of this paper. In the past, with the emphasison capital expenditure's contribution to growth, analysts have oftenused the COS concept for this purpose. This is defined as government'scurrent account surplus, or total current revenue (TR) _!/ lessgovernment current expenditure (CE), and attempts to measure theinvestable surplus derived from the government's operations.

How adequate is such a measure in judging the growth implicationsof fiscal policy? In answering this question it should be recognizedthat the COS concept has three critical elements in common with allapproaches to devising operational indicators of growth potential.

1/ Conventionally, foreign grants are excluded following the argumentthat unlike other revenues they are outside the control of the govern-ment. Hence the term "own" savings. However, given the fungibility ofreceipts and the power of government policy to encourage/discourageforeign support, this assumption could be disputed. In practice allrevenues from the sale of capital assets, as well as the proceeds ofdivestment are excluded from revenues since they tend to represent once-off transactions, usually linked to previous year's savings.


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First, a conceptual framework which defines what types of expenditureinfluence growth. Second, a system of weights based on the importanceof each type of expenditure. Third, a set of data requirements thatmust be satisfied to make the indicator operational. Reviewing the COSindicator from this perspective, we can see that it is based on a rathersimple conceptual scheme which identifies capital expenditures alone ashaving an impact on growth. As a consequence, its system of weights forthe growth potential of different types of expenditure is rathersimple: zero for current expenditure and unity for capital expendi-ture. This simplicity is reflected in its low data requirements, whichare also its greatest strength, since they allow the COS indicator to bemade operational with comparative ease.

Although simplicity is the GOS's main strength, it is also itsgreat weakness. The conceptual scheme from which it derives itsrationale is based on the assumed overriding importance of capitalexpenditure for the growth process. Yet in LDCs it is usually notdifficult to find examples that seem to refute such an easyassumption. The so-called "white elephant" projects are an obviouscontradiction of the idea that all capital expenditure is productive.The demonstrated importance of expenditure on education in developinghuman capital, and of expenditures to maintain existing physical capitalassets, suggest some current expenditures can be as productive as anycapital expenditures. Further, one must accommodate the fact that somecurrent expenditures are complementary to capital spending, and arenecessary to make it productive. As a result, the usual example of thelow productivity of road workers without necessary shovels or otherequipment could be reversed. However, since it has been so crucial inthe discussion of the growth implications of fiscal policy, theassumption of capital expenditure's inherent superiority seems to merita more detailed examination.

Ill. Capital Expenditure and Fiscal Adjustment

In reviewing the literature, one encounters three recurringarguments for favoring capital expenditures over current expenditures.First, that they are essential for growth. Second, that they have beendiscriminated against in the past. Third, that they are lessinflationary than other expenditures. Each of these arguments meritsmore detailed consideration.

1. Capital expenditures are essential for growth

Largely as a result of influential growth models developed in the1950s and 1960s, a prevalent view persists among development economiststhat there is some minimum amount of capital expenditure required for


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growth. _!/ This presumption has in the past led to public investment inlarge-scale "modern" industry, a strategy which it was felt would leadto faster growth than the promotion of private investment alone.Emphasis on growth linkages also promoted the idea of public investmentas a leader in the growth process, by providing the necessary infra-structure to ensure adequate returns to private investment.

However, the assumed relationship between private or publicinvestment and the growth of output has been increasingly disputed inrecent years. Experience of developing countries has shown thatcountries with high rates of growth have not had proportionally higherrates of investment. On the contrary, some African countries have hadhigh rates of investment but experienced low or even negative growthrates. Indeed, it can be argued that the debt problems currently facingso many developing countries have arisen from unwise public sectorinvestments in the past. .2/ As a result, though emphasizing theimportance of investment, development economists now tend to lay greaterstress on the efficiency of resource allocation.

Following this line of reasoning, it has been claimed that capitalexpenditures tend to be qualitatively superior to equivalent amounts ofrecurrent spending. It is argued that because most capital spending isdiscrete and tends to be incremental in nature, it can be subjected tocareful appraisal at the margin to ensure that it is fully productive.Typically, this is not possible with most recurrent expenditures.

However, capital expenditures, if properly defined, measureadditions to durable goods in the economy and for at least two reasonsare likely to be only imperfect indicators of their contribution toincreasing the productive capacity of the economy. At one level, thereare data problems; it is not always possible to consistently apply thedurable goods criterion to distinguish capital from currentexpenditures. At another level, partly also reflecting these dataproblems, the connection between the accumulation of durable productiongoods and economic growth is only imperfectly understood and, as manyresearchers have discovered, difficult to demonstrate empirically. 3/ Apriori it is possible to argue that some current expenditure may well beequally beneficial to growth (e.g., education), while some capitalexpenditures are obviously wasteful. Elsewhere, the present author hasreported empirical results that include both current and capitalfunctional expenditure categories in explaining the growth performance

I/ This perception forms the basis for the World Bank's concept of a"core investment" program. Indeed, numerous countries' investmentplanning has been based on an assumed relationship between investmentand the growth of output.

2/ For an elaboration of this increasing critical side effect seeTanzi (1988).

3/ For a review of the literature see Diamond (1989), p. 13ff.


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of a sample of LDCs. Evidence is also presented that implies that not

all categories of capital spending have had an identifiable influence on

growth (Diamond (1989)).

Moreover, even in economies where investment is applied more

efficiently, as in the advanced countries, economic analysis of their

growth performance by Abramovitz (1956), Cairncross (1962), Denison

(1974), Kuznets (1966), and Solow (1957) among others, still leads to

the conclusion that investment has made a very small contribution to

growth. There is little reason to expect the same would not apply to

the Third World. Moreover, for this investment to make an impact, it

must compensate for the typically high rates of population growth in

developing countries. As Anderson (1987), _!/ pointed out, if a

developing country had a high rate of investment, say 20 percent, and a

very good rate of return to that investment, say 15 percent, it could

only aspire to a growth rate of 0.2 χ 15 = 3 percent, which for many

countries would be close to the population growth rate.

2. Capital expenditure has been overly discriminated against

The criticism is often voiced that the failure to differentiate

between types of expenditure in fiscal adjustment has been unduly

detrimental to capital spending. In particular, it is pointed out that

since the benefits from capital spending are only realized in the

future, they tend to be the most susceptible to cuts. This is in part

because of political expediency, and in part a preference for current

consumption over future consumption.

Of course, the nature of many capital expenditures is such that

they are incurred in discrete amounts for limited periods, and may be

postponed rather than cut entirely. However, from the stabilization

viewpoint, often concerned with the speed and magnitude by which

expenditures can be cut, the sensitivity of capital expenditures in

expenditure cutting exercises does not necessarily appear a

disadvantage. In any case, casual observation of LDCs does not appear

to bear out the presumed overriding preference for current spending. It

is true that in many countries some types of current spending like the

wage bill are regarded as sacrosanct. But the large number of white

elephant projects and status buildings in LDCs testify to the political

gains from conspicuous capital spending. Indeed, in undertaking

expenditure cuts, there is perhaps more discrimination displayed against

particular types of current expenditure. For example, operations and

maintenance expenditures have tended to suffer at the expense of wages

1/ Anderson, 1987, p. 17.


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and entitlements, as is evidenced by the prevalence of severemaintenance problems and the underutilization of productive capacity inmany LDCs. 1/

3. Capital expenditure is less inflationary

Two distinct arguments are often made on behalf of capitalexpenditure being less inflationary than recurrent spending. Firstly,it is argued that if capital expenditure is financed by concessionalforeign loans or grants, then it is counterproductive to cut suchcapital expenditure to reach some overall deficit target, since nocrowding out of private sector credit will be implied. Secondly, somewould claim that the usual rationale for spending cuts does not apply tocapital spending. Namely, fiscal adjustment often aims at reducinggovernment expenditure so that the crowding out that has taken place inthe past will be negated, leaving room for private investment and thusencouraging growth in the economy. Unlike current spending whichcompetes with private investment, the complementarity between governmentand private investment is stressed. Cutting the former, it is argued,will be highly contractionary in causing a further fall in privateinvestment.

Those primarily concerned with stabilization usually counter thefirst of these arguments by pointing out that although grant-financedcapital expenditures may have no adverse impact on the balance ofpayments or may crowd out private investment, they are still infla-tionary to the extent that they increase aggregate demand for domesticgoods and services. Moreover, given the greater availability of inter-national finance for investment projects than for maintenance expendi-ture, there may be an overemphasis on foreign financed capital expendi-tures. This is reinforced by the greater political payoff in creatingnew infrastructure than in maintaining the old. Certainly the fact thatcapital expenditures are financed from abroad does not imply that theyare any more productive than other capital expenditures, nor that they

U Tanzi has emphasized that a general problem in developingcountries is that they "have been more successful at buildinginfrastructure, than at its adequate maintenance or use" (Tanzi (1988),p. 16). See also the various examples cited in the World Bank's WorldDevelopment Report of 1983, which concluded that "use of plants andequipment is often extremely low, sometimes only a quarter or a third ofthe rates achieved by the best maintenance organizations.... The lackof spare parts and fuel is often to blame for poor plant utilization"(World Bank (1983), p. 45).


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require Less operating and maintenance recurrent expenditures. _!/ Thelatter will usually not be eligible for financing by grants orconcessional loans.

Moreover, insofar as capital expenditure is financed byconcessional loans, balancing any longer-term impact on growth is theobligation to repay that will have future consequences for the deficitand balance of payments. As to the complementarity between governmentand private investment, it should not be forgotten that complementarityalso exists between government current expenditures and privateinvestment. For instance, expenditure on law on order, and basicadministration, and the stability this creates, may be regarded asprerequisites for private investment. As W.A. Lewis pointed out sometime ago:

"Economic growth is associated with an increase incapital per head. It is, as we have seen, also associatedwith much else: with institutions which give incentive toeffort, with attitudes which value economic efficiency, withgrowing technical knowledge, and so on. Capital is not theonly requirement for growth, and if capital is made availablewithout at the same time providing a fruitful framework forits use, it will be wasted" (Lewis (1955)).

To sum up, the above discussion would lead us to conclude thatcharacterizing the choice between stabilization and growth as a choicebetween recurrent and capital expenditures is misguided. A priori, onecould expect some current expenditures and not all capital expendituresto contribute to growth. Further, the author's own admittedlypreliminary exercises seem to confirm this conclusion. As aconsequence, in developing indicators of growth potential, emphasisshould be placed on the broader concept of growth-oriented expendituresrather than concentrating on total capital expenditure alone.

The latter in turn would suggest a careful examination of thecomposition of capital as well as current expenditures.

_!/ Indeed, Tanzi warns there may be influences biasing theseexpenditures toward being less productive. Given the very large sumsinvolved, and the potential benefits to the firms who receive thecontracts, there is likely to be greater attempts at bribing associatedwith the capital expenditure part of public spending than with thecurrent expenditure part. When these attempts succeed, as theyoccasionally do, part of the capital expenditure is de facto transformedinto what could be called a transfer payment (Tanzi (1988), p. 18).


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IV. The COS Indicator Reconsidered

Viewed in the light of the previous discussion, the COS indicatorbased on the presumed overriding importance of capital expenditureappears somewhat limited. The most important problem is that it focuseson the distinction between capital and current expenditure when, asargued above, the more important distinction perhaps should be betweengrowth-promoting and nongrowth-promoting expenditure. The COS measuredoes not recognize that some current expenditures are more productivethan others and that some current expenditures may be more productivethan some types of capital expenditure. It also fails to capture thecomplementarity that often exists between capital and current spending.

Consider, for example, two expenditure mixes: the first with ahigh proportion of growth-promoting capital expenditures but with norecurrent maintenance or operations expenditure; and the second,representing the same level of spending with a lower proportion ofgrowth-promoting capital expenditures that do have the necessarycomplementary current expenditures. There is the strong possibilitythat the first mix of expenditure will not have as favorable an impacton aggregate growth. Approaches to estimating these weights arediscussed in Section V below.

One possible approach to accommodate this problem of thecomposition of spending is to adjust the COS indicator to better reflectthe "surplus" available for growth-promoting expenditures. The adjustedCOS would be defined as:

Adjusted (1)

where TR is total current revenue (excluding grants), w^ are a set ofderived weights reflecting the potential growth-promoting value ofcategory i current expenditure, CE. Thus one could visualize aweighting scheme where defense expenditures may have a weighting of one,while operating and maintenance expenditures may have a weighting closeto zero reflecting their greater potential contribution to growth.Approaches to estimating these weights are discussed in Section V below.

Apart from the practical problems in making such an indicatoroperational, two obvious drawbacks still remain with the adjusted COSindicator. First, the underlying presumption that all capital spendingis growth promoting is retained. However, there may be a case forallowing some capital expenditures to have a weight less than zero, andallowing some current spending to have a weight lower than somecategories of capital spending. Second, the adjusted COS measure, incommon with the unadjusted COS, ignores how government expenditures arefinanced. By ignoring the growth implications of government revenue-raising measures, the COS indicator, both in its adjusted and originalforms, takes a partial view of the impact of government operations on


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growth and by doing so may be misleading. For example, a budget with ahigh proportion of growth-promoting expenditures financed by growth-inhibiting taxation may not be viewed as favorably as a lower percentageof growth-promoting expenditures financed by growth-neutral taxation.Similarly, growth-promoting expenditures financed by inflationary meansmay end up inhibiting growth by accelerating inflation and possiblyinhibiting private investment, while a lower level of such expendituresfinanced in a noninflationary way may have a more beneficial impact ongrowth.

Such considerations imply that it would not be meaningful to talkof a growth-weighted COS indicator unless all expenditures and thereceipts that financed them were weighted to reflect their potentialeffect on growth. Thus one could define a weighted COS indicator:

Weighted (2)

where R = total receipts, including sources of borrowing as well asdifferent taxes; E = total expenditure, including capital as well ascurrent expenditures; g. = weight reflecting the growth potential ofcategory j receipts; ana w^ weight reflecting the growth potential ofcategory i expenditure.

Obviously, the weighted indicator described in equation (2) is farremoved from the simple easily operational COS measure we first startedwith. Although the simplicity that characterized the original COSconcept was its greatest strength, it was argued that this was more thanoutweighed by the danger of its being overly simplistic and coming tomisleading conclusions. At the same time, to contemplate constructingsuch a comprehensive indicator as the weighted COS is overly ambitiousgiven our limited capacity to explain economic growth, let alone itsrelation to government operations. In the public finance literature,for example, one often encounters speculation on the growth impact ofdifferent taxes. In particular, the old controversy about the choice ofa consumption- or income-based tax system (Hall (1968), Tanzi (1969),Goode (1976), Meade (1978), and Pechman (1980)) recently had a new spurtof life with the emergence of the "supply side" approach (e.g., Boskin(1978), Canto, Joines, and Laffer (1983)). However, despite intensivework in this field, the empirical relationship between taxes and growthis far from conclusive. In contrast, the relationship between thestructure of government expenditures and economic growth has receivedmuch less attention and is even less clear.

Given the present state of the art, the approach suggested in thi$paper is much less ambitious. It adopts a partial approach to theproblem that can be characterized as follows. In assessing the adequacyof a fiscal adjustment program, it is common to face the situationwhere, with a given balance of payments outlook, and an estimate of thefinancing requirements of the nongovernment sector, there is felt to be


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some maximum level of aggregate government resource use. In the shortrun the level and structure of taxes can be assumed fixed, and anassessment made of the possible sources of government financing. As aresult, the level of aggregate government expenditure emerges that meetsthe overall demand management objectives of the adjustment program. Thequestion then arises as to how one can best assess the impact on growthof this level and composition of government expenditure.

One possible approach is illustrated in the following sections ofthis paper. It should be admitted from the outset that at the presentstate of knowledge we cannot hope to come to any firm conclusions.Rather the method, and the case study illustrating its application, isoffered as a demonstration of a technique yet to be refined. Inhighlighting the type of problems likely to be encountered, it alsosuggests further areas of research that need to be completed before thisapproach can become fully operational.

V. Indicators of the Quality of Expenditures 1/

The previous discussion stressed the importance of looking at thecomposition rather than the aggregative level of expenditures, as wellas the functional manner in which are deployed. To compare two sets ofexpenditure data from different time periods on a consistent basis, italso appears necessary to deflate them by the corresponding level ofGDP. Ideally, this allows the composition of expenditures in any yearto be shown as a matrix of deflated expenditures, E—, with i = l, Nfunctions and j = l, M economic types. The next step is to assignweights to the different categories of expenditure according to someview as to their potential contribution to growth. In terms of thematrix of expenditures, there are two sets of weights to consider: aset of functional weights, f·; and a set of economic type weights, t·.

Using this method, five different comparisons are possible:

1. Weighting each sector's expenditure by its functional weights,f · it is possible to derive an assessment of the growth potential ofspending in each sector:

2. Weighting each economic category of expenditure by its weightby type, t·, a similar assessment can be made:

l_l Although directed toward devising indicators of growth potential,this approach can be generalized to other policy objectives (e.g.,employment potential, redistribution, regional balance, etc.).

(3)


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(A)

3. Each sector's expenditure may also be weighted by a compositeweight derived from its functional weight and the weights of itscomposition of expenditures by economic type:

(5)

4. In a similar fashion, each economic category of expendituremay be weighted by a composite of its economic type weight and that ofits distribution across functions!

(6)

5. The exercise also allows an assessment of the growthimplications of the compositional change in expenditures between twotime periods to be reduced to a single index number of growth potential:

(7)

To make this method operational, two issues must be resolved: firstly,obtaining detailed expenditure data; and secondly, deciding on a systemof weights.

1. Data requirements

In any attempt to classify expenditures by their potential growtheffects an obvious constraint to be overcome is that of obtaining asufficiently disaggregated data base. Ideally, it is necessary toassess the growth implications of different functional compositions ofexpenditures together with the different economic types of expen-ditures. For example, it may be necessary to assume that spending(whether current or capital) in the agricultural sector may make agreater contribution to growth than equivalent amounts spent on socialsecurity transfers. Certainly, most development plans in developingcountries have some preconceived sectoral priorities from the viewpointof growth. At the same time, the economic type of expenditure in eachfunction may also be critical. As previously discussed, the distinctionbetween current and capital expenditures, whether legitimate or not, has


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often been highlighted. However, within current expenditures, one couldexpect a different impact on growth from current spending, say, on thewage cost of road maintenance as opposed to interest payments.

At the same time, one must be aware of the dangers of thisapproach. An assessment of, say, the impact on growth of expenditure onwages and salaries is difficult to analyze without some consideration ofnorms of employment and wage rate levels in the government sector, aswell as the functional nature of these expenditures. For example, anincrease in wage expenditure may entail an increase in employment and areduction in real wages, which may be very unproductive. Alternatively,with no increase in numbers, an increase in real wages has the potentialfor either a positive or negative impact on growth, depending on how thelabor is employed. The basic problem is there is some implicitproduction function for different categories of expenditure and it isimpossible to ascertain whether the balance between different economiccategories is correct. Increasing wage expenditure may not be produc-tive if there is no increase in supporting spending on complementarysupplies and maintenance. Bearing these qualifications in mind, aweighting based solely on economic categories of expenditures should betreated with a great deal of caution.

Moreover, there are dangers in isolating one type of expenditureand ignoring the balance between expenditures. For example, it is clearthat to be productive, capital formation requires certain supportingexpenditures on goods and services and wages and salaries. Again, thelack of information on production function relationships within thegovernment sector implies that generally accepted norms for the requiredexpenditure to support and maintain capital formation in differentsectors are not available. Undoubtedly, such limitations represent amajor constraint in identifying growth-oriented expenditures. Theseconsiderations suggest that a cross-classification of expenditure byfunction and economic type is required as a basis for judging growthpotential, which admittedly is not always readily available in mostLDCs.

2. Assigning weights

Once a data base has been assembled, preferably in sufficientdetail to reflect major functions and economic categories, the questionarises as to how to weight the different expenditure categories toreflect their potential impact on growth. In the choice of weights twobasic strategies can be envisaged: derivation of the weights ex post orex ante. In the former approach two different, although not necessarilycompeting, methods seem possible: econometric and cost benefit.


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a. Econometric

In this approach, econometric models of the growth process would beused to relate real rates of growth (in aggregate and sectoraily) todifferent patterns of expenditure. With a reasonably well fitted model,it would then be possible to use the coefficients on each category ofexpenditure (both capital and current) as a basis to derive weights.

From this viewpoint, a review of empirical studies is somewhatdiscouraging: there are formidable problems to be overcome before suchtheories can be adequately tested empirically, or much less form thebasis of policy weights. _!/ Problems arise from two main sources!namely, inadequacies in the theoretical framework, and datadeficiencies. Given the current state of growth theory, any conceptualscheme for analyzing growth may be disputed. However, even if correct,it would still prove difficult to identify possible influences ofgovernment expenditure on economic growth for at least three reasons.

First, as discussed above, government expenditure may affect growthin different ways, and it is extremely difficult empirically to separatethe different influences. Second, it does not appear possible toseparate empirically the influence of capital and current expenditures,and to isolate one type of expenditure as being more relevant to thegrowth process. Third, it is impossible to isolate governmentexpenditures from the basic macroeconomic relationships that impinge ongrowth, and consequently, by concentrating only on governmentexpenditures, may result in erroneous conclusions. For example,depending on the financing strategy, increasing "growth promoting"government expenditures (current or capital) may depress private capitalexpenditure, and/or create inflation, both of which may have adeleterious effect on aggregate capital accumulation and economicgrowth.

Apart from the lack of a sufficiently comprehensive model forcombining these elements, we must also admit the inevitably poor database creates a further constraint. At the aggregate level, in theabsence of suitable time series data, we typically have to settle forcross-country data of dubious comparability. However, even if aggregatedata are available, all indications are that further disaggregation isrequired, especially to deal with complementarity between capital andcurrent expenditures. Moreover, the econometric approach, relying as itdoes on ex post data, may not be the best basis for policy weights.There are important normative implications of applying coefficients

1/ See the discussion in Section IV, Diamond (1989).


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derived from past performance with all existing distortions andconstraints as the standard by which to judge the efficacy of presentpolicies. l_/

b. Microeconomic cost-benefit approach

To pursue a different tack, it may be possible to derive a systemof policy weights by examining government expenditures at the microlevel. Project data may exist that has been used to calculate necessarylevels of complementary current expenditures to various productivecapital expenditures. At the same time, rates of return for differenttypes of current and capital spending may also be available. Whenranked by order of magnitude, these rates of return from differentsectors would form the basis for policy weights. Unfortunately, in manyimportant sectors, such as health and education, there is a markedabsence of cost-benefit analyses which would allow a subsectoral ortotal sectoral ranking. As a result, it is probable that assemblingsuch data for any developing country would involve a major researcheffort.

c. Ex ante approach

In the absence of the means of operationalizing the above twomethods, perhaps there is no alternative but to adopt an ex anteassignment of MBayesian"-type weights. This is the approach adopted inthe following case study. Obviously, an ex ante choice of weights couldutilize as much information as available from the previous approaches,but would depend heavily on the value judgments of the policymaker.These may be embodied in national plans which often describe thegovernment's priorities between different sectors with respect toeconomic growth. There may also be ex ante data at the project levelthat describes projected rates of return from different categories ofplanned government expenditures. Certainly from this review it wouldappear that the empirical basis for the construction of weights shouldbe an area for future research.

1/ A similar problem arises in trying to derive indicators of taxeffort from econometric models. As Tanzi has succinctly put it: "If webelieve, as we all seem to do, that the tax structures of mostdeveloping countries are far from what they should be and they should bechanged, why should we use as our reference point the average of allthese distortions?" (Tanzi (1973), p. 207).


- 15 -

VI. Thailand; A Case Study

From the discussion of the previous section, the first and mostimportant step is to compile expenditure data by function and economictype on as a disaggregated and consistent basis as possible. Appendix Ishows the matrix of government expenditures in Thailand for 1984 brokendown by economic function and economic type, while Appendix II shows theequivalent breakdown for 1985.

It must be admitted that the degree of disaggregation possible forThai expenditure data is superior to most developing countries.However, even at this level of disaggregation some of the categories mayneed further exploration. However, taking these data as a startingpoint, let us pose a hypothetical question: supposing the 1984 level ofexpenditure is considered "optimal" how can we assess the growthimplications of the change in composition of expenditures between 1984and 1985?

1. Functional weights

It is evident in Appendices I and II that Thai budget codes havebeen generally assigned in hierarchical order that may reflect theirpotential impact on growth. Of course, within each of these categoriesthe contribution to growth is likely to differ. For example, within thesocial services category, education, health, and social securityexpenditures are likely to have widely differing impacts on growth andwith differing time lags. Similarly, within the education category, onecan expect different returns from technological training as opposed toprimary education. Unfortunately, at the present state of knowledge itis not possible to separately weight each subcategory of expenditure,and we may have to settle for weights based on, say, one digitbreakdowns. Such a weighting scheme is shown in Table 1, with weights,(f·, i = l, N), assigned on a scale of zero to one depending on theirassumed contribution to growth (Table 1, column 1).

2. Economic type weights

In Table 2 it can be seen that expenditures have been broken intosix broad economic types; wages and salaries; supplies and utilities;other goods and services; fixed capital formation; transfers to thehouseholds; and transfers to local government. As discussed previously,for our purposes one would like to separate those more productivecurrent expenditures, for example, those complementary to productivecapital expenditures, from those likely to have a less direct impact ongrowth. In this regard it should be noted that maintenance expendituresare generally found in third category (other goods and services), whilesupplies and utilities generally refer to recurrent needs of themini stries.


- 16 -

Table 1. Thalland: Comparison of Growth-Weighted Expenditures, 1984 and 1985

(By function)

Code

1.000

1.100

1.1101 . 1301.1311.133

1.1341.1401.150

1.200

1.300

1.400

1.480

1.500

2.000

2.1002.1202.1302.1402.150

2.2002.2102.2302.241

2.242

2.2432.250

2.300

2.320

2.4002.440

3.000

3.100

3.200

3 . 3003.3203.3303.340

3.400

4.0004.1004.300

4.500

Tut a 1

Sector

Economic service

Agriculture and non-mineral resources

AdministrationAgriculture

IrrigationSelf-help land

sett leraentOther

ForestryFishing

Fuel and power

Other mineral resources

Transport, storage, andcommunicationsRoads

Others

Social service

Etlucat ionPrimary schoolsSecondary schoolsColleges and universitiesTechnical training

HealthAdministrationHospitalsMedical and dentalcenters and clinicsIndividual healthservices

National health schemesSpecial health programs

Social security andwelfareSocial security benefits

OthersWater supply

General services

General administration

Defense

Other general uurvlcu«Law courtsPolicePrisons

Others

Una 1 locableGeneral debt serviceGeneral transfer tolocal governmentOthers

U>SectorWeights

0.8000.8000.8000.8000.8000.8000.8000.8000.800

0.900

0.800

0.9000.900

0.700

0.6250.7000.6000.5000.700

0.4500.3000.400

0.500

0.5000.5000.500

—

—

——

—

—

—

0.2000.2000.2000.200

—

—

0.700--

(2) (3)Weighted Onlyby Function

1984

2.222

1.2150.0640.9940.664

—0.0570.2730.1080.049

0.052

0.042

0.8820.796

0.032

2.903

2.5101.5710.4350.2230.279

0.3930.0490.240

0.022

0.0050.0410.036

—

—

—

—

0.205

—

--

0.2050.0170.1720.016

—

0.014

—

0.014

—

5.344

1985

2.320

1.2700.0621.0450.6810.0030.0140.3500.1050.058

0.012

0.036

0.9660.894

0.036

2.863

2.4821.5550.4490.2080.270

0.3810.0420.246

0.006

0.0070.0480.034

——

——

0.296

—

—

0.2960.0300.1770.017

—

——

——

5.479

(4)-(3)/(2)

1.044

1.0460.9721.0521.026

—0.2521.2820.9731.184

0.233

0.851

1.0951.122

1.136

0.987

0.9890.9891.0320.9310.968

0.9710.8461.022

0.250

1.3091.1760.961

·*-

—

——

1.441

—

—

1.4411.7711.0291.058

—

——

—--

1.025

(5)Weight

Function1984

1.179

0.5770.0090.5100.397

—0.0240.0880.0410.017

0.024

0.012

0.5580.522

0.010

0.669

0.5840.3560.0930.0640.072

0.0850.0110.039

0.012

0.0010.0150.007

——

——

0.041

—

—

0.0410.0040.0330.003

—

0.004

—

0.004--

1.893

(6)ed byand Type

1985

1.333

0.6500.0090.5810.4400.0020.0020.1390.0380.022

0.004

0.008

0.6550.627

0.016

0.678

0.5800.3320.1150.0610.073

0.0970.0050.066

0.001

0.0020.0160.006

——

——

0.112

—

—

0. U20.0150.0360.004

—

—--

----

2. 122

(7) =(6)/(5)

I. 130

1.1270.9521. 1401.109—

0.0881.5680.9441.282

0.176

0.660

1.1761.201

1.646

—

0.9940.9341.2360.9501.015

1.1400.4591.711

0.080

1.5261.1010.913

——

--

2.755

—

—

2.7553.5571.0841.214

—

--

----

1.121


- 17 -

Table 2. Thailand. Comparison o£ Grouch-Weighted Expenditure«, 1984 ,i ml Ι94Ί

(By economic type)

(1) (2) (3) (4) = (5) (6) (7)=Type Weighted Only (3)/(2) Weighted by (5)/(4)

Sector Weights by Type Function and Type

1984 1985 1984

Wages and salaries 0.100 0.598 0.693 1.159 0.252

Purchase of supplies and utilities 0.200 0.456 0.645 1.415 0.110

Other purchases of goods and services 0.400 1.239 0.492 0.397 0.148

Fixed capital formation 0.800 1.962 3.035 1.547 1.340

Subsidies to households

Transfer to local government 0.300 0.126 0.118 0.931 0.044

Total 4.382 4.983 1.893

1985

0.254 1.007

0.111 1.011

0.068 0.461

1.661 1.240

—

0.028 0.647

2.122


- 18 -

The degree of aggregation of the fixed capital formation category

is also something of a problem. As previously indicated it would be a

mistake to classify all of this category as productive,. To some extent

the need to separate different types of capital expenditures by their

probable growth impact is accommodated by assigning sector weights«

However, even within individual sectoral subcategories there is likely

to be wide variation in rates of return, which only detailed research

would allow some approximation. For example, based on investigations of

rates of return to different types of education in other developing

countries, a higher weight is assigned to primary education than

secondary education, and the latter is given a higher weight than

university education. With these qualifications in mind, ex ante

weights are assigned to each economic type of expenditure

on a scale of zero to one as shown in Table 2, column 1.

Accepting for the moment the validity of these weights, a

comparison both in terms of function and economic type can be made which

is summarized in Tables 1 and 2, Indices of the growth potential of

each functional category of expenditure, F^, are shown in columns 2

and 3 of Table 1, while indices for each economic category of expen-

diture, the, T·, aje shown in columns 2 and 3 of Table 2. Composite

weights, F. and Т., are shown in columns 5 and 6 of Tables 1 and 2,

respectively. It can be seen that the overall index of growth

potential, G, increased from 1.89 to 2.12 (or 12 percent) from 1984 to

1985.

By examining column 7 of Table 1 it is evident that the major

changes in potential contribution to growth appear to have originated

from increased expenditures on agriculture, fishing, roads, other

communications, and secondary schooling. For comparative purposes,

1984/85 expenditures are shown weighted only by functional weights

(Table 1, column 4) and economic type weights (Table 2). Functional

weights as a whole also show an improvement, contributed by much the

same sectors as identified previously, but of a much smaller magnitude

(3.5 percent). In terms of the economic type of expenditure, it would

appear, firstly, that the increase in capital formation and, secondly,

the increase in purchases of supplies and utilities, made the greatest

contribution. This largely reflects their relative policy weights.

VII. Conclusion Remarks

To sum up, this paper proposed a method by which expenditure data

might be adjusted, arranged, and consolidated to yield a simple short-

hand index of the impact of fiscal adjustments on the growth of the

economy. In pursuing this proposal by calculating a weighted growth

index, a number of necessary assumptions have been revealed.

This exercise pinpointed the need to take decisions about whetheror not to weight expenditures, and if so, what weights to use.

Unfortunately, it must be admitted that the inherent problem in the


- 19 -

above approach arises from the fact that there is not, nor is therelikely to be in the near future, a weighting scheme that would not bedisputed. As a result, any weighting procedure could be exposed tocharges of manipulation, or worse, be considered so inaccurate that wemight have to abandon altogether any attempt to construct unidimensionalmeasures of the fiscal impact on growth. Certainly our brief review ofthe causes of growth would allow one to sympathize with the view that,at best, the fiscal impact on economic growth was so complicated aquestion that any attempt to describe it in a simple index would be moremisleading than helpful.

Alternatively, a more positive stance could be adopted. Short ofoverwhelming agreement as to the best weights, there might still be someagreement on some weights being better than others. The question wouldthen be whether this set is sufficiently better than not having weightsat all to justify probably confusion in its use. This paper does notclaim to provide a definitive answer to this question. Rather anattempt has been made to outline how the problem could be approached, topinpoint the major difficulties encountered, and to suggest furtherareas of research that would be required to make the approachoperational.

The method outlined above, after all, can be viewed as little morethan formalizing the impressionistic, and often imprecise, approachesalready employed by expenditure analysts. Certainly, the adoption ofthis type of quantitative approach seems worthy of closer examination,if for no other reason than the detailed analysis of the structure ofgovernment expenditures it entails and the resulting discipline itimposes. As a consequence, conclusions based on this type of yardstickare likely to be a lot less arbitrary than those based on currentlyemployed approaches, such as the COS concept.


APPENDIX [- 20 -

Table 3. Thailand: Structure of Goverment Expenditure, 1984

(In thousands oí bäht)

Code

1.000

1,100

LIJO1.13o1.131

1.1331.1341.1401.150

1.200

1.3001.400

1.4801.500

2. 000

2.1002.1202.1302.140

2.1502.2002.21O2.2. .2.241

2.242

Sector

Economi c services

Agriculture andnonrolnera lresources

administratio nAgriculture

Irrigatio nSelf help larriSetclaaäntOther

ForestryPishing

Fuel and power

Other mineral resources

Transport, storageand coraamications

RoadsOthers

Social services

EducationPriiaary schoolsSecondary schoolsColleges and

universitiesTechnical training

HealthAdministrationttospitalsfedlcal and dental

centers and clinicsIndividual health

services

Goods andServices

8,984

6,443750

4,5201,976

1782,366

7773%

.

380

1,731

1,300317

34,527

27,77716,8024,885

3,0803,0106,1161,2083,566

94

87

Wages andSalaries

6,018

4,347541

2,9761,618

1061,252

591239

53

263

1,144

878211

29,294

25,15116,1434,677

2,1872,1443,7921,1412,230

63

22

Curren t YearPurchas e ofSupplies andUtilitie s

2,345

1,634194

1,147162

60925186107

28

103

492

35288

4,157

2,274432188

836818

1,7O>59

1,271

30

49

Curren t YearOthe r

Purchase sGood s andServices

621

46215

397196

12.—50

32

14

95

7018

1,076

35222720

5748

6228

65

Carry-ove rPrevious

Year

2,353

1,34917

1,240796

2711735433

306

29

640

45629

2,216

1,326401415

315195761

7017

303

77

Transfer s Curren t YearSubsidies to to Local Fixed Capita lHousehold s Governmen t Formatio n

— 395 9,649

— — 5,686— — 7— — 5,157— — 4,456

— — 17— — 674— — 436— — 86

_ _ 12

— — 30

- 395 3,831

— 395 3,602— — 90

6,310 1,784 2,480

834 1,317 1,85962 1,317 827

725 - 201

42 — 5805 - 251

438 - 33535 — D

403 - 203

. — —

_ — 11

(Carryove rPrevifxis Year)Fixed Capital

Formatio n

4,485

1,3205

1,193850

230.4676

131

72

2,957

2,8715

4,876

4,0362,47 3

847

33742965!2S4116

259

~

1

16


- 21 - APPENDIX I

Source: Budget Documänt, Budget Bureau, Ministry of Finance, Thailand; compiled by Department of Econcralc Research, Bark of Thailand.

Table 3. Thailand! Structur« of Oovemmnt Expenditure, 1984 (concluded)

(In thousands of bäht)

Code

2.2432.2502.300

2.3202.4002.440

3.000... ... .3.1203.130

3.1403.150

3.2003.2203.2303.240

3.3003.3203.3303.340

3.4003.440

4.0004.1004.300

4.500

Sector

Nationa l health schemesSpecial health programm eSocial security

and welfareSocial security benefitsOther s

Water supply

Genera l services

Genera l administratio nOrganisatio n of StateFiscal administratio nGenera l economi c

regulation sForeign affairsOther s

ttefenseAmed forcesCivil defenseOther s

Other general servicesLaw court sPolicePrisons

Other sOthe r coranunit y services

(transfere d to localgovernrent )

Unallocabl eGenera l debt serviceGenera l transfer s to

local governmen tOther s

Tota l

Good s andServices

598s 563

3271

307123

40,730

6^037752

1,382

381694

2,828

24,56022,908

2501,402

8,491663

7,138690

1,642

849

7,76234

—7,722

92,003

Wages andSalaries

35301

173—17866

21,629

4,620403

1,117

296427

2,377

10,34810,219

6861

5,577558

4,682337

1,064

575

——

——

56,941

Curren t YearPurchas e ofSupplies aodUtilitie s

69224

1D3—7833

9,605

1,054109232

77236400

5,3705,270

9010

2,772104

2,315353

409

205

——_

—

16,107

Curren t TearOthe r

Purchase s Carry-ove r Transfer s Curren t YearGood s and Previous Subsidies to to Local Fbted Capita lServices Year tfausehold a Goverrmen t Formatio n

49438

511

5124

9,496

36324033

83151

8,8427,419

921331

1421

141—

149

69

7,762—

—7,722

18,95

185 —. —

75 4,941— _54 9743 97

10,346 58

354 296 2

109 —

16 —31 —

102 —

8,907 198,613 19

119 -175 —

853 —34 —

764 -55 —

232 37

109 —

596 —_ —

— —5% —

15,511 6,368

— 3— 10

467 U— —— 275— 234

1,705 1,395

— 268— 28— 90

— 14— 69— 77

— —— —— —— —

— 452— 122— 305— 25

1,705 675

1,705 475

201 —— —

189 —11 —

4,085 13,524

(Carry-ove rPrevious Year)FlJte d Capita l

Formatio n

57

20—

11995

662

IBS6820

114343

———

21118

18013

266

100

——

——

10,023


APPENDIX II- 22 -

Table A. Thailand: Structure of Government Expenditure, 1585

(In thousands of baht)

Code

1.000

1.100

1.1101.1301.1311.1331.1341.1401.150

1.200

1.300

1.400

1.4801.50.

2.000

2.1002.1202.1302.1402.1502.2002.2.2.2302.241

2.242

Sector

Economi c services

Agriculture andnotmlnera lresources

Administratio nAgriculture

Irrigatio nSelf help land settlemen tOther

Forestr yFishin g

Fuel and power

Other Minera l Resource s

Transport , storageand conmunlcatlon s

RoadsOther s

Social services

Educatio nPrimar y schoolsSecondar y schoolsColleges and universitie stechnica l trainin g

Healt hAdministratio nHospital sMedica l and denta l

center s and clinicsIndividua l health services

Good s andServices

9,209

6,795769

4,7231,977

1792,567

841462

94

390

1,647

1,191283

37,268

29,33717,9845,2513,0503,0527,1721,3384,371

10386

Wages andSalaries

6,378

4,637569

3,1601,693

1131,354

646262

46

279

1,205

928211

31,577

26,80017,2005,0502,3002,2504,3941,2402,700

7011

Curren t YearPurchas e ofSupplies andUtilitie s

2,342

1,6811B7

1,1557357

1,025192147

18

101

482

34260

4,515

2,233571200694768

2,09384

1,591

3350

Curren t YearOther

Purchase sGood s andServices

489

47713

403211

9188

353

30

10

-40

-7912

1,176

304213

15634

6851480

—25

Carry-ove rPrevious

Year

961

42221

33975

72573230

16

16

499

3998

1,504

694389

32166107757

38285

429

Transfer sSubsidies to to LocalHousehold s Governmen t

— 57

— 30— —— 15— —— —— 15— —— 15

- —

- —

— 27

— 26— —

6,952 1,778

888 1,343156 1,343679 —43 —10 —

420 —25 —

395 —

_ _

— —

Curren t YearFixed Capita l

Formatio n

11,702

6,5385

6,0185,000

171,001

43085

5

19

5,101

4,92539

2,991

2,3421,186

409456281363

8335

26

Fixed Capita lFotnsclo n

(Carry-ove rPrevious Year)

6,739

2,6608

2,4441,744

1868252

156

24

36

3,818

3,720201

5,596

4,3751,8951,368

571541

1,01726

962

515


- 23 - APPENDI X I I

Source : Budget Docunent , Budget Bureau, Ministr y of Finance , Thailand ; conpllfid by Departmen t of Economi c Research , Bank of Thailand .

Table 4. Thailand : Structur e of Governmen t Expenditure , 1985 (concluded )

(In thousand s of bant )

Code

2.2432.2502.3002.3202.4002.440

3.000

3.100.. .3.1203.1303.1403.1503.2003.2203.2303.240

3.3003.3203.3303.340

3.400

3.440

4.000

4.100

4.500

Sector

Nationa l health schesossSpecial health program sSocial security and welfareSocial security benefitsOther s

Water supply

Genera l services

Genera l administratio nOrganizatio n of StateFiscal Mralnistratio n

Good s andServices

65262239813

361150

46,892

6,674933

1,449Genera l Economi c Regulation s 451Foreign AffairsOther s

DefenseArmed forcesCivil defenseOther s

Othe r general servicesLaw court sPolicePrisons

Other sOthe r cotmunit y services

(transfere d to localgoverrtffint )

Unallocabl e (includin gadjustments )Genera l debt serviceGenera l transfer s tolocal goverrmen t

Other s (includin gadjustrasnts )

Tota l

724.. .

29,36827,716

6451,006

9,156716

7,675765

1,694

964

7,572

—

—

7,544

100,941

Mages andSalaries

4033318365

20070

23,293

5,030489

1,131338481

2,54011,20011,031

8472

5,960604

4,991365

1..

632

8,768-180

—

8,750

70,016

Curren t YearINirchafl e ofSupplies andUtilitie s

87248IDS788435

12,233

1,227201250102230444

7,5637,028

46373

3,037109

2,547381

406

as

8,771-270

—

8,764

27,861

Othe rPurdvun MGood s andServices

52541

110-104

7745

11,366

417243181113

13110,6059,657

98861

1593

13719

172

114

-3,967360

—

-9,970

3,054

......>.. .Previous

Year

328737

13134026

11,226

2768374143075

10,1379,614

125207

69816

65427

115

46

1,193—

—

1,192

14,884

....... «Subsidies to to UxialHousehold s Governosn t

___ .

— —5,539 4355,196 435

105 —— —

78 2,006

J --T -

2 —— —— —— —— —25 —— —— —— —

— —— —— —— —

50 2,010

— 1,720

— 220— __

— 215

— 5

7,030 4,053

Qirrri t Yt»iirPixui i Capita l

Formatio n

21016—

270227

1,469

27524611260

.——18—

4,8%756425

26

617

484

837

837

14

16,999

Fixed Capita lPnnrei t f f i O

(Giiry-^Vrt- E

Previous Year)

45

13—

191151

1,600

31747876

41135——2

—

54484

39960

352

527

93—

93

—

14,028


- 24 -

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Cairncross, A.K., Factors in Economic Development (London: Allen and

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- 25 -

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