The Structure of Growth in Local Government Expenditure (1993 - 2001)

BY

Mal. Bashir Jumare

  Institute of Administration

Department of Local Government Studies

A.B.U. Zaria

Forwarded by I. A. Waziri

iawaziri@uaemail.com 

 

 

ABSTRACT

            This article critically examines the hypothesis of Adolph Wagner, which pointed to the growing importance of government activity and expenditure as an inevitable feature of a progressive state.  The empirical evidence from expenditure profile of the Nigerian local governments between 1993 – 2001 bearing on its validity is assessed and the comments of some prominent recent writers on related themes are analyzed.  In particular, the paper examines the basic features of local governments spending, including their distribution between consumption (recurrent) and investment (capital) expenditures as they relate to the GDP over time.  The paper is concluded with an examination of the relative efficiency of the local governments in resource utilization.  The conclusion was that local governments in Nigeria are most affected by the low level of capacity for development.  Despite the urge to decentralize as a strategy of promoting grassroots development, the capacity to sustain such strategy is still lacking in many local government areas.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.1          INTRODUCTION

 

Local Governments are essentially set up to effect delivery of basic social services among geo-political entities.  These services are articulated in the local government reforms of 1976 and listed in the Fourth Schedule of both 1979 and 1999 Federal Government Constitutions.  Of interest to this assignment is the nature of financial involvement of the local government in these social services provision.  The assignment examines the spending habit of local governments from 1993-2001, the growth of expenditure is examined over the period.  The pattern of local governments expenditure is addressed with a view of highlighting the basic features of their spending including their distribution between capital expenditure and recurrent expenditures.  We have also examined the growth patterns and profiles of both recurrent and capital expenditure as well as the total expenditure, as they relate to the GDP over time.  The last section tries to look at the elasticities of capital, recurrent and total expenditure in relation to GDP at current cost.  The last part of the assignment is the conclusion and recommendation.   Section two of the paper attempts to examine public expenditure theory and provides theoretical framework.

 

1.2              PUBLIC EXPENDITURE: GENERAL CONSIDERATIONS

Public expenditure refers to the expenses, which the government incurs for its own maintenance as also for the society and the economy as a whole.  Some government expenditures are in return for goods and services that account as part of current output.  When the government buys the services of factors of production and uses them to produce goods and services in the public sector of the economy, the factors are unavailable to produce private-sector output.  With expanding State activities, it is becoming increasingly difficult to judge what portion of the public expenditure can be ascribed to the maintenance of the government itself and what portion to the benefit of the society and the economy.

 

Though historically public expenditure is found to be continuously increasing over time in almost every country, the area of public expenditure remains relatively unexplored.  As Lowell Harris says, “the economists have generally concentrated their attention on the theory of taxation.  The theory of public expenditure has been more or less confined to that of generalisations in terms of the effects of public expenditure on employment and prices etc”.    Of course, it may be pointed, that lately this deficiency is being removed by various studies in the field of public expenditure.

Over one hundred years ago Adolph Wagner, a leading German economist of the day, formulated a “law of expanding state expenditures” which pointed to the growing importance of government activity and expenditure as an “inevitable” feature of a “progressive”  State.  According to Wagner, there are inherent tendencies for the activities of different layer’s of a government (such as central, State and local governments) to increase both intensively and extensively.  There was a functional relationship between the growth of an economy and the growth of the government activities so that the governmental sector grows faster than that of the economy.  In the original version, it is not clear whether Wagner was referring to an increase in (a) absolute level of public expenditure, (b) the ratio of government expenditure to GNP,  (c)  proportion of public sector to the total economy.  Wagner offered three reasons why this development would come about with respect to the administrative and protective functions of the State.  Wagner  thought, because of the substitution of public for private activity.  In addition, new needs for public regulative and protective activity would develop as a result of the increased complexity of legal relationships and communications that inevitably accompanied the greater division of labour with industrialization.  In later writings, Wagner anticipated many subsequent authors by adding the increase in population density and urbanization (which he saw accompanying industrialization) as additional factors leading to increased public expenditures on law and order and on economic regulation, in order to maintain the efficient performance of the economy in the face of the increased frictions of urban life.

Secondly, Wagner  also explicitly predicted a considerable relative expansion of cultural and welfare expenditures, especially with respect to execution and the redistribution of income.  Though the reasons why he thought these activities would expand were left less than clear in his exposition, he appears to have assumed, in essence, that they constituted “superior goods” or “luxuries”.  In  other words, the income elasticity of demand for these public services was greater than unity, so that more of them would be demanded as income rose.

Finally, Wanger suggested that the inevitable changes in technology and the increasing scale of investment required in many activities would create an increasing number of large private monopolies whose effect would have to be offset, or the monopolies taken over, by the State in the interests of economic efficiency.

Several comments must be made about this “law” and the reasoning underlying it.  One important point is that these ideas were formulated in Germany in the later nineteenth century.  Unsurprisingly, therefore the ‘law and explicitly framed to refer only to states in which income was raising as a result of industrialization.  The conditions under which one might expect the “law” to operate would therefore seem to be (1) rising per capita incomes (2) technological and institutional change of particular sort, and (3) at least implicitly democratization (in the senseof wider political participated) of the polity.

A second point is that Wagner himself thought of the “law” as a proposition in the positive theory of public expenditures which refers that body of economic and political analysis which attempts to understand and explain the observed pattern and level of government expenditures and the changes in those expenditures over time.  In fact, however, his exposition of the “law” was inextricably entangled with his own normative assumptions as to the nature of the state and the state activity.  Thus it should be surprising if the reasons Wagner offered in support of his general positive proposition do not stand up very well to critically analysis, for on the whole they were simply statements of what he thought ought to happen as the economy became industrialized.  This criticism is especially relevant to his arguments on the increase in public production and the rise in cultural and welfare expenditures.  The latter in particular can only be understood it one realises that Wagner viewed the state as comprises of different units of government under Federal structures and each unit with its own tastes and preferences.

Under a Federal system of administration, the public sector role in economic management and development is the joint responsibilities of the various levels of government.  A Federal structure ensures that public goods and services which are consumed at the local levels are supplied by State and local authorities, while the central government concentrates on provision of services that are centrally consumed.  Therefore in order to prevent conflicts and ensure efficient provision of services, the functional responsibilities and revenue sharing arrangements are always enshrined in a constitution protecting the inter-dependence and inter-governmental fiscal relationships of the tiers of government.

The issue of efficiency is central to the impact and sustainability of inter-governmental fiscal relations.  The ability of this relationship to stimulate growth and enhance the welfare of the population well depend on the efficiency of the fiscal system.  At this point, it is more important to address the issue of relative efficiency among the various tiers of government rather than exploring the genesis of raising public expenditures, as this would determine the ultimate impact of changing the allocational responsibilities of government.  A change that results in moving responsibilities and expenditures powers from a relatively more efficient unit to a less efficient unit would certainly result in lowering of the impact of public expenditure growth.  Enough evidence abound to demonstrate the relative efficiency of the various tiers of government, in which the Wagner’s law tends to ignore.

Despite the unpersuasive nature of some of his reasoning, as detailed nature of some vision of the rise in the state activity – and the (assumed) accompanying rise in government expenditure as a proportion of national income – has been apparently confirmed over the last century in every advanced country in the world.  It is therefore important to look more closely at the relevant evidence level of this theory confirmation at the local government level.

 

1.2.1            THEORETICAL FRAMEWORK

Empirical testing of Wagner’s “law” might conceivably proceed at two levels.  First does the “law” appear to hold at the local government level?   To examine this we interpret Wagner’s “law” from two perspectives.  The first interpretation  is to show the relationship betweend the total local government expenditures to the GDP.  By total expenditures is meant expenditures by all local governments over period of time for their consumption (overhead and personal enrolment of staff) and investment (provision of capital expenditure) measured in this way the local government expenditure has grown the fastest.  As will be seen later it is largely the rapid rise in recurrent expenditures that is the cause behind this.  The second interpretation of Wagner’s law focuses on the character of public goods and services supplied by the local governments.  As concerns consumption, local governments supplied education, medical care (primary health care), welfare services and so forth, all of which were believed to be income-elastic, that is the demand for them would increase faster than GDP.

The second empirical testing of Wagner’s “law” are the assumptions underlying the “law” valid?  Rephrasing we might characterise them as follows: (1) a substantial number of public goods provided by the local governments are income-inelastic, that is they are consistent with a falling share of public expenditure in income over time.  Borcherding and Deacon (1972, 1977 6, 1978, 1985), alone or together, conclude that the average income elasticity of demand is 0.75 in the united states, a figure corroborated by Bergstrom and Goodman (1973) who wind up with 0.64 (not significantly different from 0.75).  (2)  an increasing amount of efficiency is to be expected as development proceeds at the local government level.  Questions are hard to answer empirically especially the latter, because of the complexity of measuring relative efficiency in the public sector.  In sections three and four the paper attempts using empirical data of the overall expenditure of Nigerian local governments between 1993-2002 to demonstrate the correctiveness of Wagner’s “law” of increasing public expenditure.

 

1.3            GENERAL PROFILE OF LOCAL GOVERNMENT EXPENDITURE

Financial Memoranda Chapter Two, Three and Four deal with local government estimates and preparation of items to be included in the budget.  Every budget or estimates contain two basic elements: Recurrent and capital estimates whereas the recurrent expenditure caters for the transient items of the budget is made up of two items: personal emolument, overhead cost.  The capital expenditure take care of items that have more permanent features.  These items are further broken into head-grouping based on sectors.  Economic, social services, area development, administration and repayment of capital loan.

Table 1.1 shows the expenditure profile of local governments in Nigeria between 1993-2000 local government expenditures have grown substantially over the period covered [1993-2000].  Even though the total expenditure decreased from N19475.3m in 1993 to N18967.1 in 1994 fiscal year, there was continuous increase of this expenditure between 1994 to 1996 fiscal year.  From 1997 fiscal year the total expenditure continued to increase very rapidly.  It was N4274.2m in 1998 but went up to N6036m in 1999 fiscal year.  The figure increased to N131215.5m in 2000.

In the same table 1.1, we further observed that the expenditures on recurrent estimates continued to maintain steady increase in expenditure from 1993 to 2000.  In 1993 the recurrent expenditure was N13966.5.  This figure increased to N14884.2m in 1994.  Correspondingly, there was drastic increase in the recurrent expenditure between 1998 to 2000.  In 1998 the expenditure was N29,192.2m, it went up to N41,614.0 in 1999 fiscal year.  The recurrent expenditure has skyrocketed in 2000 fiscal year.  The expenditure on capital expenditure has depart significantly when compared with the recurrent expenditure.  The recurrent expenditure slightly dropped from N5508.8m in 1993 fiscal year to N4082.9 in 1994 fiscal year.  This figure maintained steady increase up to 1997.  In 1994 the figure went up to N8,083.4 million and further continued to increase to N13549.0 million in 1998 and to N18747.3 million in 1999.  In 2000 the figure jumped to N40241.9m.

We have further observed from the same table 1.1 consistent increase in the recurrent expenditure over the period continued to be given much attention than the capital expenditure both in absolute figures and in the progression.

 

1.3.1        DISTRIBUTION OF EXPENDITURE BETWEEN RECURRENT AND CAPITAL EXPENDITURE

 

One of the most important principles in the allocation of resources into various activities of local governments relates to the structural balance between capital and recurrent expenditures.  Table 1.2 shows percentage distributions of 774 local governments between 1993-2000 on the basis of their capital and recurrent expenditures.  It can be seen from this table that the resources of the local governments between 1993-2000 were unequally appropriated between capital and recurrent expenditures.  We find that from the table, recurrent expenditure accounted for an average of 70.5% of the total expenditures of local governments.  From 1993 to 1997 recurrent expenditure maintained steady percentage allocation of not less than 71.27% over the capital expenditure.  By 1998, there was slightly decrease to 68.30% of recurrent expenditures to total expenditures.  Between 1999-2000 the figure slightly increase from 68.94% in 1999 to 69.32% in 2000 fiscal year.  On the capital expenditure side, the average percentage allocation between 1999-2000 was below 21.53%.  It was only in 1998 fiscal year that allocation went to the tune of 31.70%.


Thus, when we take cognisance of the fact that the bulk of local government financial resources from both internal and external sources go into financing personnel emolument and overhead costs, while other charges take up the balance.  The reality is thus that local governments are unable to declare recurrent budget surpluses which could be transferred to capital budget for the execution of capital development.  This problem has in turn reduced the ability of their being agents of development for their communities.  Capital expenditures, when they occasionally occur are usually made for the maintenance and upgrading of primary rural and community infrastructures.  The limited size of the capital budget has always been a constraints to local governments capacities to embark on any major socio-economic projects.  Thus, the major characteristic of local government expenditure in Nigeria is almost the non-existence of major capital expenditures except in a handful of local governments and that the bulk of local government revenues from both internal and external sources go into financing non-developmental expenditures.

It is our believe that a virile local government should not only be in control of its funds but also have a good proportion of it for the provision of amenities for the people.  In this regard, all local governments in the country do not have that free hand to decide on their programmes because of abuse and financial recklessness that might follow that type of freedom.  To worsen the situation, approved estimates after series of consultations, amendments and distortions are no more than mere annual or routine exercise as extra-budgetary expenditure, often improperly imposed by higher levels of government, eats deep into the finances of the local government and often times it takes precedence over their approved proposals.  Under such circumstances, it is difficult to expect the local people to derive maximum services from the meagre resources of the local governments when their “supposed representatives cannot cater for their interests.”


Within the recurrent expenditure, general administration including councillor’ allowances, secretary and treasurer’s department and traditional councils’ offices consumed a large proportion of the funds allocated.  It is plausible to argue that factors such as the harmonisation of salaries and other counterparts at the federal and state levels of government, rising trends in salaries across the country and in particular salaries of medical and health staff to match with the inflationary trend, vehicle and other allowances and the expansion of administrative staff partly because of additional local governments created to cope with the increasing responsibilities of local governments, have more than anything else increased the cost of administration relative to other sub-heads and to the overall recurrent expenditures of the local governments.  The recurrent expenditure also shows that a large size of the funds of the local government was spent on education which was deducted directly at source of local government funds.  This trend has continued even till date especially since the federal and state governments no longer have responsibility for the service.

 

1.3.2        RELATIONSHIP BETWEEN RECURRENT, CAPITAL AND TOTAL EXPENDITURES TO GROSS DOMESTIC PRODUCT AT FACTOR COST

 

In this section, we examined the general growth profile of local government expenditure and the GDP over the period.  Table 3.1 shows the relationship between recurrent, capital, total expenditures and Gross Domestic Product (GDP) at factor cost.  We shall therefore specifically examine the following recurrent and capital expenditures as they relate to the GDP and the total

expenditures as they relate to GDP.

 

1.3.2.1             Recurrent Expenditure and the GDP

Table 3.1 reveals that between 1993 to 2000 the percentage of recurrent expenditures over GDP continued to fluctuate from maximum of 2.52% in the 2000 fiscal period to minimum of 0.63% in 1996 fiscal year.  From 1994 the percentage of recurrent expenditure to GDP decreased from 1.60% to 0.83% in 1995.  It further decreased to 0.63% in 1996 fiscal year.  There was slight increase to 0.77% in 1997 and 1.01% in 1998 fiscal year.  Between 1999 to 2000, the recurrent expenditure slightly increased from 1.28% to 2.52% respectively.

 

1.3.2.2             Capital Expenditures and the GDP

On the capital account, the picture was not different.  The maximum percentage of capital expenditures to the GDP was recorded in 2000 at 1.11%.  In 1993 the percentage of recurrent expenditures to GDP was 0.75%.  It however continued to decrease from 0.50% in 1994 to 0.31% in 1995 and 0.25% in 1996.  Between 1997 to 1998 the figure remained 0.29%.  In comparison with the recurrent expenditures, the ratio of recurrent expenditure to the GDP was slightly higher than the ratio of capital expenditure.  This reveals the dominant of recurrent expenditure over the capital expenditure.


 

1.3.2.3 Total Expenditure and GDP

The growth of total expenditures in relation to the GDP follows by and large a pattern similar to the relationship between recurrent and capital expenditures and GDP as we can observe in table 3.1.  From 1993 to 1995 percentage of total expenditure and GDP continued to decrease.  For instance, in 1993, the figure was 2.8% and decreased to 2.1% in 1994.  In 1995 the figure drastically reduced to 1.14%.  There was further decrease to 0.88% in 1996 fiscal year.  From 1997 the percentage/ratio of total expenditures and GDP slightly increase from 1.06% to 1.30% in 1998.  It however made a significant rise from 1.86% in 1999 to 3.63% in 2000.

 

1.3.3        ELASTICITIES OF RECURRENT, CAPITAL AND TOTAL EXPENDITURES AND GDP

 

In this section, we examined the Wagner’s Law of increasing expenditure to GDP.  Several studies have examined the elasticity of expenditure to GDP for goods and services provided by local governments.  They agree however that most categories are income-inelastic.  The elasticities of the two line of expenditures (recurrent and capital expenditures) were calculated and presented in table 4.1.  From the table the elasticities of both the recurrent and capital expenditures from 1993 to 1996 were found to be below unity (less than one), that is they are consistent with a falling of public expenditures in income over time.  But from 1997 to 2000, the elasticities were more than unitary, reflecting positive increase of both expenditures and GDP.  We also observed that in 1998 fiscal year the elasticities of both recurrent and capital expenditures were negatives to GDP.  This means that expenditures and GDP have been moving in opposite direction (not significantly related).

 

1.4              EFFICIENCY AT THE LOCAL GOVERNMENT LEVEL

This level of government is considered the most inefficient of the three tiers of government in Nigeria.  There is no doubt that the revenue base of local governments is small.  But  the vertical allocation of the Federation Account shows that the share of local governments increased from 10% in 1981 to 15% in 1990 and to 25% since 1992.  This implies that huge amount of money has been transferred to the local governments since 1981.  It appears that there was a problem of absorptive capacity as most local governments were unable to make efficient use of funds allocated them.  Besides the ability of these governments to realise their potential taxable capacity in respect of those revenue sources within their jurisdictions decreased.  Furthermore, the costs of operating their statutory functions rose unnecessarily.  Except for few local governments the general picture is that of inability to meet the basic responsibilities set for them.  Let us examine primary education which is a primary responsibility of local governments.  Primary school enrolment has grown rapidly from a narrow base ever since 1976 when UPE was launched.  The programme of UPE provided school places for all six year old children.  The costs were shared among the Federal, State and Local Governments and parents.  Privately operated primary schools have been allowed and they have fared better than public primary schools.  However, the rapid expansion of public primary schools has been accompanied by qualitative deterioration and the rate of drop-out rising every year.  In most of the primary schools in Nigeria, teachers have very few teaching materials which are of poor quality.  Furniture, equipment and materials were either not available or generally below the standards one could see some years ago.  In most schools, there are three to five pupils for each available textbook and primary school walls frequently collapsed after strong winds.  It may be argued that the inadequate teaching environments and materials at the public primary schools could be attributed to the fact that a large proportion of the available funds was used for teachers’ salaries.  The performance of local governments is even worse in other areas.  In fact there has been almost total neglect of functions.  Other responsibilities of local governments include medical and health services, water supply, sanitation, markets construction and maintenance of local roads, maintenance of public libraries and reading rooms.  Because local governments did not pursue the policy of fiscal prudence there was a minimal overall impact of fiscal federal  on economic development at the grassroots.  Poverty at the local level is so glaring that local government need explain what their function has been.  Local governments were unable to contribute optimally to social and economic development despite the considerable increase in statutory revenue allocation to them.  For example, we know that current revenues of local governments increased from N19,874.5 million in 1993 to N44,968.2 million in 1998.  Money received from the Federation Account increased from N18,316.4 million in 1993 to N30,620.9 million in 1998.  Money received the Value Added Tax Fund also increased from N3,558.8 million in 1995 to N10,170.8 million in 1998.   The level of poverty in the local government areas can not support any claim of efficiency at this level.

A number of studies have highlighted various constraint on local governments and explained to level absorptive capacity and their limited ability to spearhead development at the grassroots.  A UNDP assisted Capacity Assessment of Human and Institutional Resources for Planning and Development at Local Government Level in Nigeria states that the culture of planning is beginning to take root at the LGASs.  It is noted that a greater percentage of the LGAS are now preparing their own rolling plans.  It noted that there is a wide gap between projects planned and projects implemented.  A large percentage of projects initiated either did not see the light of the day, or abandoned during their execution.  About 38$ of projects initiated were executed.  Out of this lot, 56% are under implementation many years after the commencement of implementation and 49% of the projects being implemented have been abandoned.  Projects are poorly located.  The study found that a greater percentage of the political and community leaders have no relevant qualifications for planning and management of development.  The staffing level and quality are low.  Most of the units have less than the required number of personnel for effective delivery of their expected responsibilities to the LGAs.  There was a serious shortage of Economists, Engineers, Medical Doctors, Nurses and Laboratory Technicians in most of the LGAs surveyed.  LGAs are experiencing difficulty in supervising their field units due mainly to: lack of personnel, lack of vehicles, bad roads, inadequate funds, poor communication and inadequate logistic support.  On the whole it was found that most of the senior staff of the LGAs have been performing their tasks without the prerequisite qualifications.  About 28% of LGA officials at the first three top career positions hold the first university degree or its equalivalent.  Only 4% holds a second degree.  The rest hold varying professional Certificates in Nursing, Accountancy, and other technical fields.  This has implications for effective delivery of development at the level.  The field work conducted during this study confirmed these findings.  The LGAs are poorly equipped with a large number of broken down equipment, poor infrastructure and low resources base.  Only a few LGAs in Nigeria mostly in urban areas are different in some regards.

 


1.5            SUMMARY AND CONCLUSIONS

Several determinants of growth and pattern of public expenditure have been examined.  From the empirical data from the local governments the following observations were made:

1.                  Of the Wagner’s law of raising public expenditures, it has been confirmed that the total local government expenditures continued to raise more than increase in the Gross Domestic Product.

2.                  The path of expenditure amongst the components shows the dominance of recurrent expenditure on personnel emolument and overhead costs.  The level of capital expenditure over the period of study was relatively very low.  This constitutes a problem for many local governments, which exist only to pay salaries and staff allowances.  A virile local government should not only be in control of its funds but also have a good proportion of it for providing social services for the people.

3.                  It was observed that between 1993 to 1996 the elasticities were substantially below unitary and between 1997 to 2000 elasticities increased to above unitary.  This demonstrates that Wagner’s “Law” holds in aggregate terms for most periods for all the local governments, and, further, that the most rapid expenditure increases have generally been in quest for more and better social services.

4.                  Analysis of the relative level of efficiency shows that local governments are mostly affected by the low level of capacity for developmental purposes.  Despite the urge to decentralise as a strategy of promoting grassroots development areas, the scarcity of local high skilled manpower may constrain the positive effects of decentralization.

 

1.5.1        CONCLUSION

Local governments are expected to perform a wide range of statutory functions, not just in the traditional areas of maintening law and order but also in the provision of social and the promotion and management of development.  To do these effectively and efficiently, no doubt, requires huge amount of resources for which local governments have depended heavily on external sources.

In order to raise funs sufficient to effectively address the myriad of development problems and challenges facing them, local governments have to demonstrate more imagination and exert greater efforts in generating a substantial portion of their revenue requirements through raising their investments in productive and viable economic activities.  We therefore recommend the Federal Government should design appropriate legislation to make it mandatory on local governments to be able to finance a significance part of their recurrent expenditures, particularly on staff emoluments.

This measure has an in-built capacity to make local governments bureaucracy not only efficient but also imaginative in their fiscal operations and spending habits.

 

REFERENCES

 

1.         Adolph Wagner:            Finanzwissenschaft 3rd edition, (1890) and also Grandlegung der politischen Oekonrmie 3rd edition, (1893).

 

2.            ABUCONS;             Evaluation of Revenue and Responsibilities of the Three-Tiers of Government in Nigeria (1997), Final Report of Study Revenue Mobilization, Allocation and Fiscal Commission, Abuua.

 

3.            Borcherding, T.E. ed. (1977)            Budget and Bureaucrats: The Sources of Government growth; Durham Duke University Press.

 

5.                  Borcherding, T.E. ed. (1977a); One Hundred Years of Public spending 1890-1970; in Borcherding ed. Chapter 2.

 

6.                  Borcherding, T.E. ed. (1985); The Causes of Government expenditure Growth: A Survey of the US Experience; Journal of Public Economics 28 (december).

 

7.                  Borcherding, T.E.  and Deacon R.T. (1972); The Demand for Services of Non-Federal Governments, American Economic Review 62 (December).

 

8.                  Buchanan, J.M. (1949):            The Pure Theory of Government Finance: A Suggested Approach.  Journal of Political Economy, Vol. LVII (December).

 

9.                  Buchanan, J.M. (1950)  “Federalism and Fiscal Equity; American Economic Review, Vol. XL (Sept.).

 

10.              Deacon R. (1978); A Demand Model for the Local Public Sector; Review of Economics and Statistics 60 (May)

 

11.              Bhatia, H.L. (1976); Public Finance; Vikas Publishing House PUT Ltd New Delhi 1987 edition.

 

12.              Lowell Harris, C. (1958);             Public Finance in B.F Haley (ed).  A Survey of Contemporary Economics; Homewood III pp. 261-62.

 

13.              Richard A. Musgrave (1969)            Fiscal Systems: Yale Univerity Press, New Haven Chapter 4.

 

14.              Richard M. Bird (1970);            The Wagner’s Law of Expanding State Activity; Isaak Walton Kilam Award from the Canada Council University of Toronto.

 

15.              Simon Kuznets (1967); Modern Economic Growth; Yale University Press, New Haven p. 150.

 

16.              TABLE 1.1 - LOCAL GOVERNMENT EXPENDITURES (=N= MILLION) 1993-2000

 

YEAR

 

RECURRENT EXPENDITURE

 

CAPITAL EXPENDITURE

 

TOTAL EXPENDITURE

 

GDP AT CURRENT FACTOR COST (=N=

 

1993

 

13,966.5

 

5,508.8

 

19475.3

 

691606.8

 

1994

 

14,884.2

 

4,082.9

 

18967.1

 

911091.3

 

1995

 

16,317.2

 

6,126.1

 

22,443.3

 

1960689.1

 

1996

 

17,292.5

 

6,969.2

 

24261.7

 

2,740458.5

 

1997

 

21,856.5

 

8,083.4

 

29939.9

 

2834998.7

 

1998

 

29,192.2

 

13,549.0

 

42741.2

 

2721510.7

 

1999

 

41,614.0

 

18,747.3

 

60361.3

 

3250670.0

 

2000

 

90,973.6

 

40241.4

 

131215.5

 

3,614280.0

 

SOURCE:        C.B.N. ANNUAL REPORT AND STATISTICAL STATEMENT OF ACCOUNTS FOR THE YEAR ENDED 31ST DEC. 2001 AND STATISTICAL BULLETIN VOLUME 9, NO. 2 DEC. 1998.

 

 

TABLE 2.1 - DISTRIBUTION EXPENDITURE BETWEEN RE AND C.E.

 

 

YEAR

 

RECURRENT EXPEN.

 

CAPITAL EXPEND.

 

TOTAL EXPEND.

 

% R.E TO T.E.

 

% C.E. TO T.E.

 

1993

 

13,966.5

 

5,508.8

 

19,475.3

 

71.71

 

28.29

 

1994

 

14,884.2

 

4,082.9

 

18,967.1

 

78.47

 

21.53

 

1995

 

16,317.2

 

6,126.1

 

22,443.3

 

72.70

 

27.30

 

1996

 

17,292.5

 

6,969.2

 

24,261.7

 

71.27

 

28.73

 

1997

 

21,856.5

 

8,083.4

 

29,939.9

 

73.00

 

27.00

 

1998

 

29,192.2

 

13,549.0

 

42,741.2

 

68.30

 

31.70

 

1999

 

41,614.0

 

18,747.3

 

60,361.3

 

68.94

 

31.06

 

2000

 

90,973.6

 

40,241.9

 

131215.5

 

69.33

 

30.67

 

 

 

 



TABLE 3.1  - RELATIONSHIP BETWEEN R. E., C. E. AND T. E. TO GROSS DOMESTIC PRODUCT AT FACTOR COST (=N= MILLION)

 

 

YEAR

 

R. E.

 

C. E.

 

T. E.

 

GDP AT FACTOR COST

 

% R. E. TO GDP

 

% C. E. TO GDP

 

% T. E. TO GDP

 

1993

 

13966.5

 

5508.8

 

19475.3

 

691606.8

 

2.05

 

0.75

 

2.8

 

1994

 

14884.2

 

4082.9

 

18967.1

 

911091.1

 

1.60

 

0.50

 

2.1

 

1995

 

16,317.2

 

6126.1

 

22443.3

 

1960689.1

 

0.83

 

0.31

 

1.14

 

1996

 

17,292.5

 

6969.2

 

24261.7

 

2740458.5

 

0.63

 

0.25

 

0.88

 

1997

 

21,856.5

 

8083.4

 

29939.9

 

2834998.7

 

0.77

 

0.29

 

1.06

 

1998

 

29,192.2

 

13549.0

 

42741.2

 

2721510.7

 

1.01

 

0.29

 

1.30

 

1999

 

41,614.0

 

18747.3

 

60361.3

 

3250670.0

 

1.28

 

0.58

 

1.86

 

2000

 

90973.6

 

40241.9

 

131215.5

 

3614280.0

 

2.52

 

1.11

 

3.63

 

 

TABLE 4.1 - ELASTICITIES OR R. E., C. E., T. E. TO GDP [=N= MILLION]

 

 

YEAR

 

R. E.

 

C. E.

 

T. E.

 

GDP AT FACTOR COST

 

ELASTICITY OR R.C.

 

ELASTICITY OF C. E.

 

ELASTICITY OF T. E.

 

1993

 

13966.5

 

5508.8

 

19475.3

 

691606.8

 

-

 

-

 

-

 

1994

 

14884.2

 

4082.9

 

18967.1

 

911091.3

 

0.21

 

-0.82

 

0.08

 

1995

 

16317.2

 

6126.1

 

22443.3

 

1960689.1

 

0.08

 

0.43

 

0.16

 

1996

 

17292.5

 

6969.2