On National or Supranational Objectives: Improving the Effectiveness of Targeted Expenditure Programs

By Ping Zhang, Eivind Tandberg, Ehtisham Ahmad

December 1, 2002

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Ping Zhang, Eivind Tandberg, and Ehtisham Ahmad. On National or Supranational Objectives: Improving the Effectiveness of Targeted Expenditure Programs, (USA: International Monetary Fund, 2002) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Central governments or the international community at large are concerned about subnational service delivery. The design of targeted expenditure programs features frequently in central efforts to redistribute infrastructure and social spending or assure minimum standards. These programs are typically financed by the center, often with external assistance, but are implemented at the subnational level, which may not have incentives to spend the resources as intended by the center or donors. We discuss mechanisms for improving the effectiveness of targeted public expenditure programs, modeling the interaction between different levels of government as a dynamic game. An incentive structure could be designed that compelled local governments to truthfully reveal their ability to implement national programs in a cost-effective manner and to exert the effort required to maximize the expected benefits. The models have direct policy relevance in the Heavily Indebted Poor Countries (HIPCs), where donor-financed resources are used for poverty-reduction at the local level, or in large countries such as China, where there is an effort to redirect social and infrastructure spending to particular regions.

Subject: Asset and liability management, Budget planning and preparation, Competition, Debt relief, Expenditure, Financial markets, Financial sector policy and analysis, Moral hazard, Public financial management (PFM), Tax incentives

Keywords: Budget planning and preparation, Central government objective, Competition, County government, Debt relief, Expenditure program, Implementing government, Incentive schemes, Intergovernmental finance, Lower bound, Moral hazard, Program deliverables, Provincial government, Public expenditures, Scale factor, Second period, Selecting scheme, Selection scheme, Transfer scheme, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/209
Stock No:

WPIEA2092002
ISBN:

9781451874761
ISSN:

1018-5941

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