RT Journal Article
T1 How costly are public sector inefficiencies? A theoretical framework for rationalising fiscalconsolidations
A1 Onrubia Fernández, Jorge
A1 Sánchez Fuentes, Antonio Jesús
AB Fiscal adjustments consisting of spending cuts or tax increases are generally presented as the unavoidable way for achieving public finance sustainability in the long term. However, this view of fiscal consolidation processes is limited as it leaves out other aspects related to public sector performance which are relevant not only from the macroeconomic but also from the microeconomic perspective. This paper models Public Sector Performance (PSP) by proposing a theoretical framework that integrates the conventional methodology for measuring its productive efficiency and the monetary assessment of social welfare changes linked to public policy reforms. Two equivalent measures of social welfare change generated by improving (or worsening) productive efficiency are deduced using duality theory. The first is obtained from the cost function, while the second arises directly from the production function. The results reveal that taking advantage of budgetary savings obtained from this approach constitutes a valuable tool for designing welfareenhancing fiscal consolidation packages, meanwhile promoting sound fiscal balances and growth prospects over the long term.
PB Kiel Institute for the World Economy
SN 1867-8009
YR 2017
FD 2017
LK https://hdl.handle.net/20.500.14352/18901
UL https://hdl.handle.net/20.500.14352/18901
LA eng
NO Ministerio de Economía y Competitividad (MINECO)
NO Universidad Complutense de Madrid/Banco de Santander
NO Junta de Andalucía
DS Docta Complutense
RD 7 abr 2025