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Hugh-Jones, David 
ORCID: https://orcid.org/0000-0002-8360-8884
(2014)
Why do crises go to waste? Fiscal austerity and public service reform.
Public Choice, 158 (1-2).
pp. 209-220.
ISSN 0048-5829
Abstract
In the tight budgetary conditions following the 2008 financial crisis, governments have proposed saving money by reforming public services. This paper argues that tight budget constraints make reform harder by introducing an information problem. Governments are uncertain about bureaucratic departments' effectiveness. Normally, effective departments can be identified by increasing their budget, since they can use the increase to produce more than ineffective departments can. When budgets must be cut, however, ineffective departments can mimic effective ones by reducing their output. Budget cuts thus harm both short-run productive efficiency, and long-run allocative efficiency. I confirm these predictions in a US dataset. Low marginal productivity bureaucracies reduce output by more than expected in response to a budget cut, and budget setters respond less to observed short-run marginal productivity after cutback years.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | bureaucracy,reform,signaling,sociology and political science,economics and econometrics ,/dk/atira/pure/subjectarea/asjc/3300/3312 |
| Faculty \ School: | Faculty of Social Sciences > School of Economics |
| UEA Research Groups: | Faculty of Social Sciences > Research Groups > Environment, Resources and Conflict Faculty of Social Sciences > Research Groups > Behavioural Economics Faculty of Social Sciences > Research Centres > Centre for Behavioural and Experimental Social Sciences |
| Related URLs: | |
| Depositing User: | LivePure Connector |
| Date Deposited: | 19 Jul 2022 15:30 |
| Last Modified: | 19 Aug 2023 00:50 |
| URI: | https://ueaeprints.uea.ac.uk/id/eprint/86629 |
| DOI: | 10.1007/s11127-012-0002-5 |
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