Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento
Who decides on Public Expenditures? A
Political Economy Analysis of the Budget
Process: the case of Argentina
Emmanuel Abuelafia, Sergio
Berensztein, Miguel Braun and
Luciano di Gresia
Av. Callao 25, 1° • C1022AAA Buenos Aires, Argentina - Tel: (54 11) 4384-9009 • Fax: (54 11) 4371-1221 • [email protected] • www.cippec.org
Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento
Outline of the presentation
1. The PMP in Argentina and literature
review
2. A (very brief) overview of the formal
budget process
3. The actual workings of the budget process
4. Conclusions and recommendations
Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento
The PMP in Argentina
Deep determinants
Institutional
Legacies
1930-1983
Constitution
and electoral
rules
Nature of the PMP
•Short horizons
for policymakers
and interest
groups
•Weak arenas
for intertemporal
deals
•Congress
Outer features of
policies
Policy
instability
Lack of
coordination
Lack of
cooperation
Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento
Implications for the budget process
1. The President is strong vis a vis Congress
2. Provincial governors are powerful informal
actors
3. Weak and unstable bureaucracy, which
limits budget efficiency
4. Instability in budget outcomes
Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento
Other papers
- Jones (2001): Congress has an important role
in the budget process.
- Rodriguez and Bonvecchi (2005): the role of
Congress is weak.
- The evaluation of the role of Congress
depends on the universe of public
expenditure that one analyzes.
Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento
The National Budget 2004
Argentinean Public Sector. 2004
Total Revenues:
$108.080
Municipal’s
Revenues
Provincial’s
Revenues
Total
Expenditure:
$104.371
7%
9%
13%
37%
Coparticipation
Municipal
Expenditure
Provincial’s
Expenditure
18%
National
Administration Budget
Law: $59.712
8%
11%
National
Administration
Revenues
13%
55%
PE, FF y
Other entities
7%
Primary Surpluss:
$12.645 = 3% PBI
48%
6%
National
Administration
Expenditure
PE, FF y
Other entities
Other Expenditures
Debt’s Services
Payroll
Pensions
34%
34%
.
Transfers
Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento
Degree of Exogeneity
 We constructed an index that reflects how much the
public expenditure deviates from its trend.
dSit = β0 + β1 dSi(t-1) + β2 dGDPt + β3
dPOPt +
+β4 dPRIt+ β5 dEMPt + β6 dDEBt +
+ wt (1 + β7 dGDPt + β8dPRIt) + uit
Zit = Abs(uit ) / Sit
Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento
Discretionality of Public Expenditure
Z
25%
20%
15%
10%
5%
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
0%
1982
16.6%
2.9%
10.3%
17.4%
5.8%
13.8%
13.2%
0.9%
4.5%
6.3%
4.4%
9.2%
9.6%
4.3%
6.0%
3.8%
2.3%
7.7%
4.1%
5.3%
2.1%
7.1%
1981
Year
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
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A brief history of fiscal outcomes
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The formal budget process
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The actual workings of the budget process
1. The President is the key actor, and he maximizes
his goals subject to the constraints set by the
rigidity of the budget, fiscal rules and agreements
with IFIs.
2. He also has to deal with macroeconomic shocks
and other powerful actors. (governors, lobbies,
IFIs)
Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento
The actual workings of the budget process
What are the President´s goals?
- Obtaining reelection (political coalition)
- Favorable public opinion (macro stability,
national public goods)
- Helping his home province (pork)
Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento
President is
key actor
Constraints
Formulation
Approval
Implementation
-Strategic use of
forecasts
-President defines
allocation of
marginal resources
-Allocation of funds
to home province
-Limited
changes
(pork)
-Congress
lacks
technical
capability
-Changes in both
size and allocation
-Changes not
approved by
Congress
-Rigidity
-Macro conditions
-Fiscal rules
-IMF agreements
-Lobbies (eg: Carpa
blanca)
-Delegation. New
superpowers!!!
-Need to
underexecute if low
growth
-Rigidity limits
adjustment
-Bureaucratic
learning
Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento
Strategic use of revenue forecasts
60,000
R ev en u es ' fo reca st
57,733
62,268
70,000
43,211
39,895
46,413
37,176
43,189
42,865
40,389
45,703
41,216
41,732
40,264
41,169
35,882
$ m illio ns
40,000
37,815
42,980
50,000
45,213
C o llected R even u es
30,000
20,000
10,000
1995
1996
1997
1998
1999
2000
2001
2002
2003
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Changes made by Congress and Executive
1 5 ,0 0 %
1 0 ,0 0 %
5 ,0 0 %
C o n g re s s
0 ,0 0 %
1995
-5 ,0 0 %
-1 0 ,0 0 %
-1 5 ,0 0 %
1996
1997
1998
1999
2000
2001
2002
2003
E x e c u tive
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Δ Composition by Congress and Executive
C h a n g e s in e x p e n se 's co m p o s itio n
(b efo re th e cris is : 19 9 5-2 00 1)
0. 00050
0. 00045
0. 00040
0. 00035
0. 00030
0. 00025
0. 00020
0. 00015
0. 00010
0. 00005
19 95
Stage 1: Play Congres s
19 96
1 997
1 998
S tage 2: Play Ex ec utiv e bran c h
1 999
2 000
2 001
Stage 3: Ef f ic ienc y in the ex ec ution
Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento
Implementation
 High volatility of ministers and secretaries. (Average
duration: 2.36 years).
 The institutional capacities are undermined by
– Lack of incentives faced by permanent bureaucrats
– Lack of experience of parallel bureaucrats
 The purchasing mechanism requires a high
institutional capacity.
 Then, the degree of execution will be lower the less
experienced the minister is.
 The bureaucratic work may involve a learning process.
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Bureaucratic learning
T ab le 1: R eg ression resu lts fo r b u reau cratic learn in g
D ep en d en t V ariab le
A g en cy 's D eg ree
o f E x ecu tio n
% o f C o n su m ptio n
an d U sag e g o od s
P ro g ram 's d egree
o f ex ecu tio n
P ro g ram 's d egree
o f ex ecu tio n relativ e
to ag ency 's ex ecu tio n
C o efficien t
S tan d ard
E rro r
C o efficien t
S tan d ard
E rro r
0.591
0.043
0.733
0.127
-0.098
0.014
-0.086
0.015
0.234
0.035
0.058
0.006
0.071
0.006
0.2 34
0.023
C o efficien t
S tan d ard
E rro r
C o n su m p tio n an d
u sag e
g o o d s ex ecu tio n
% o f P ay ro ll
% o f earm ark ed
tax es
% o f extern al
tran sfers
0.028
0.008
0.038
0.009
0.141
0.026
-0.564
0.048
-0.601
0.053
-0.268
0.066
% o f extern al cred it
-0.280
0.019
-0.306
0.019
-0.249
0.054
% ex ecu tio n
ex tern al tran sfers
0.054
0.025
0.076
0.027
0.115
0.054
% ex ecu tio n
extern al cred its
0.128
0.005
0.133
0.007
0.057
0.019
M in istry's
ex p erien ce
0.003
0.001
0.003
0.001
0.010
0.002
-0.00004
0.00001
-0.00004
0.00001
-0.0001
0.00003
M in istry's
ex p erien ce sq u ared
Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento
An exception:

The Ministry of Economy.
–
The average seniority of the Ministry of Economy employees is
around 23 years, 15% higher than the average seniority of all the
SINAPA´s employees (20 years). Compared with the other agencies,
the Ministry is in the top of the employees´ seniority distribution.
–
The educational level of the Ministry of Economy’s bureaucracy is
above the average. 38% of the total Ministry’ s employees have
tertiary education, two times more than the Ministry of Internal
Affairs and 20% more than the SINAPA´s average.
–
The Ministry of Economy has a higher proportion of upper
echelons. 44% of its employees are in the top 3 categories,
compared with the system average of 38%.
Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento
Extra Budgetary Funds
N um ber of
2005´s
Funds created
Bugdet
1994
1
7.2
1995
1
732.1
1996
1
12.0
1997
2
20.6
2000
2
23.3
2001
4
2,643.7
2002
1
126.8
2003
2
138.6
2004
1
0.6
15
3,705
Agencies that consolidates
in the Public Sector Budget:
AFIP, INCAA, INNSJyP
Entities and Funds that do
not consolidate:
Fondo Especial del Tabaco,
National Universities,
Yacyreta, Fondo solidario
de Redistribucion.
Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento
Evaluation and Control
 SIGEN: depends on the President.
 AGN: depends on Congress.
 Evaluation is weak.
 Audits are scarce, not timely, only legal compilance
and not an effective tool.
Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento
Conclusions
1. Actual workings of the BP are consistent with
Spiller-Tommasi description of Argentine PMP
- Executive as key actor
2. Some surprises: The bureaucracy that deals with
the BP is stable and competent.
Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento
Recommendations
1. Strengthen coordination mechanisms between
the federal and provincial governments
2. Capacity building in Congress
3. Strengthen expenditure evaluation
4. Use of private forecasts for budgeting
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