Comparative analysis of the changes in the type structure of public expenditures in advanced economies

The paper analyses the changes in the type structure of public expenditures in advanced economies. It deals with long-term changes (approximately cove ring the period since 1970) and is concerned particularly with the changes in the period of fiscal consolidation during the nineties. Selected set of advanced economies consists of the EU countries, the USA and Japan. Structu ral, analyses of public expenditures in advanced economies might serve as a n aid (not an instruction, however) also when considering future trend of p ublic finances in transforming economy. Our assumption, that along with the changes in the volume of expenditure of general government (or with the changes of general government expenditure share in GDP) marked movements occurred also in the type structure of these expenditures, has been confirmed. At the same time, these structural chang es were similar in-the predominant part of selected advanced countries. Typical structural change in expenditures of the general government in a lo ng-term horizon (since the year 1970) appears to be the growth of the share of running expenditure at the expense of capital expenditure. Marked chang es are in progress also inside the running expenditure structure: the share of total transfers grows at the expense of the share of consumption, and w ithin the framework of transfers the share of transfers to households grows at the expense of tile share of transfers to enterprises. Transfer share g rowth at the expense of current consumption means that governments relocate gradually larger share of resources to other subjects -(specifically house holds) and governments alone decide on the use of smaller share of resource s. The paper deals also with the search for certain differences in the structu re of expenditures in more efficient and less efficient economies. More eff icient EU countries compared to less efficient ones are characterised by th e fact that at the end of the monitored period govermnent relocates higher share of resources through transfers to other subjects (mainly households) and pays lower share of interest payments. The structure of expenditure in European countries however strongly differs from the structure of the USA o r Japan (for instance extraordinarily low share of enterprise transfers in the USA or extraordinarily high, however decreasing, share of capital expen diture in Japan). At the same time in the long-term horizon came to a certain convergence of public expenditure structures. In the set of selected countries one discove red convergence in the values of indicators in the case of the transfer pay ments share; the share of consumption as well as in current land therefore also capital) expenditures. The values of these parameters are less dispers ed towards the end of the monitored period compared to its start. Reversed shift can be seen in the case of interest payments,:where the shares are in selected countries more dispersed at the end of the monitored period, comp ared to its' beginning. The beginning of the era of the nineties, which is more closely observed in tile paper, was characterised by the GDP share increase in the total expen diture of the general government. This expenditure expansion had its struct ural reflection in the transfer growth to households in expenditures of the general govermnent. Such a structural shift can be explained, however, by the fact that countries responded to the world economy recession also by st ructural changes of expenditures. Along With the growing unemployment rate the weight of payments to the population increased too. The first half of t he nineties was also typical by the deceleration of the significant increas e of interest payments. A certain extreme in this period occurred in the evolution of the expenditu re structure in Finland and in Sweden. In these two countries an extraordin arily strong increase of the share of expenditures of general government in the GDP was accompanied by marked restructuring in favour of payments for population. This structural shift responded to the huge increase of unemplo yment rate in those countries. An example of the strategy different from the advancement of the whole set of monitored economies can be the progress of a group of countries (Denmark , Ireland, Portugal), which led other countries in the implementation of st ructural changes by decreasing interest payment share. Beside long-term changes the paper pays attention to the structural change in expenditures, which occur during the period of marked improvement of the result of economy management of the general government (measured by die ra tio of general government deficit toward the GDP) in the nineties. During t he second half of tile nineties similar process of deficit management disma ntling alongside with the rationalisation of public finances was implemente d in almost all EU countries (aiming at the fulfilment of the EMU criteria) , actually also in the USA. The fact that several, and in most countries si milar, structural changes in public expenditures occurred represents a rema rkable feature of the consolidation in public finances. The period of consolidation of public finances brought about tile restituti on of intensity of some structural shifts. The movement aiming at the incre ase of the share of current expenditures at the expense of capital expendit ures strengthened again. In the total volume of current expenditures the sh ore of transfers increased while the shares of interest payments and consum ption stagnated. We assume that the structure of public expenditures in the transforming eco nomy of Slovakia will gradually approach the structure of public expenditur es of advanced countries in spite of the fact, that the structure convergen ce of Public expenditures is not an explicitly formulated target of the Slo vak economy policy. We substantiate this implication for instance by the fa ct that in spite of considerable individual differences the structure of pu blic expenditures in advanced countries in the long run converged (standard deviation between tile weight of various types of expenditures related to total expenditures). Besides, the perception of the function of public fina nces gradually approaches the perception of the function of public finances in advanced countries. This will apparently influence the convergence of t he structure of public expenditures tone has to remark, however, that by th e experience of advanced economies one cannot define a pattern of ideal pro portions of public expenditures).