Open access
Author
Date
2020-01Type
- Working Paper
ETH Bibliography
yes
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Abstract
Public spending often increases at the end of fiscal years. This is undesirable because
late spending tends to be inefficient. The causes for these spending spikes are
however poorly understood. This paper offers a novel identification strategy that
relies on the historic variation in countries’ fiscal years to analyze their effect on
government disbursements. We show that the end of fiscal years rather than alternative
explanations cause spending spikes at the end of fiscal years. Our accounting
data includes discretionary contributions of 27 OECD countries to the World Bank
from 2002 to 2013 at the daily level. As suggested by the principal-agent theory,
we find that the end of year effect is smaller in countries with high administrative
quality. We analyze the pertinent budget institutions as possible mechanism.
For the first time, we can show that unexpected positive demand shocks decrease
year-end spending, a common assumption in the literature. Finally, we revisit the
complementary explanations for year-end effects in public spending. Show more
Permanent link
https://doi.org/10.3929/ethz-b-000393827Publication status
publishedJournal / series
KOF Working PapersVolume
Publisher
KOF Swiss Economic Institute, ETH ZurichSubject
sub-annual spending; fiscal year; year-end spending; bureaucratic quality; public performance; dynamic inefficiency; accounting system; foreign aid; World BankOrganisational unit
03716 - Sturm, Jan-Egbert / Sturm, Jan-Egbert
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute
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ETH Bibliography
yes
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