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How to waste a crisis : budget cuts and public service reform
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Hugh-Jones, David (2011) How to waste a crisis : budget cuts and public service reform. Working Paper. Coventry, UK: Department of Economics, University of Warwick. CAGE Online Working Paper Series, Volume 2011 (Number 51).
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Text (Working paper)
WRAP_51.2011_hugh_jones.pdf - Published Version Download (487Kb) | Preview |
Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...
Abstract
In the aftermath of the financial crisis, governments have proposed sav-ing money by reforming public services. This paper argues that tight budget constraints make reform harder. Governments are uncertain which depart-
ments are effective. Normally, effective departments can be identified by increasing their budget, since they can use the increase to produce more than ineffective departments. 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. These predictions are confirmed in a panel of US libraries. Low marginal productivity libraries reduce output by more than expected in response to a budget cut, and budget setters respond less to observed short-run output elasticity after cutback years.
Item Type: | Working or Discussion Paper (Working Paper) | ||||
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Subjects: | H Social Sciences > HB Economic Theory | ||||
Divisions: | Faculty of Social Sciences > Economics | ||||
Library of Congress Subject Headings (LCSH): | Global Financial Crisis, 2008-2009, County services, Public services (Libraries) -- United States, Expenditures, Public -- Cost effectiveness, Expenditures, Public -- Cost effectiveness -- Mathematical models, Expenditures, Public -- Econometric models | ||||
Series Name: | CAGE Online Working Paper Series | ||||
Publisher: | Department of Economics, University of Warwick | ||||
Place of Publication: | Coventry, UK | ||||
Official Date: | 27 July 2011 | ||||
Dates: |
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Volume: | Volume 2011 | ||||
Number: | Number 51 | ||||
Number of Pages: | 28 | ||||
Status: | Not Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Open Access (Creative Commons) | ||||
Date of first compliant deposit: | 1 August 2016 | ||||
Date of first compliant Open Access: | 1 August 2016 |
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