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Self-financing of Government Aid Programs

Author

Listed:
  • Michael Kloß
  • Oskar Krohmer
  • Joachim Ragnitz
Abstract
We provide a systematic discussion of possible economic and fiscal effects of public funding. Through a comprehensive analysis of potential micro- and macroeconomic transmission channels of public funding programs, we develop a checklist to evaluate the consistency of recent studies. In addition to the intended stimulus, theoretical research has identified additional effects which potentially diminish the positive effects of funding on output and employment. These are crowding-out, substitution and financing effects, which might have a negative effect on the overall economic activity. Although these additional effects are well established in the theoretical literature and are increasingly considered in micro economic evaluations, they are often neglected in empirical macroeconomic studies. This tends to result in an overestimation of the fiscal returns of public funding. From the theoretical and empirical discussions we formulate a checklist, which helps to evaluate the results of current studies. This checklist is structured in three sections. First, all explicit and implicit assumptions of the studies are identified. These assumptions clearly define the author’s view of the actual economic processes. Second, all economic effects which arise in this clearly defined analytical framework should be quantified in a given study. Any additional effects, which are not defined within the framework, can therefore not be regarded. Finally, based on the predicted economic effects the fiscal returns and the degree of self-financing are computed.

Suggested Citation

  • Michael Kloß & Oskar Krohmer & Joachim Ragnitz, 2012. "Self-financing of Government Aid Programs," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 66, May.
    • Handle: RePEc:ces:ifodrs:66
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    File URL: https://www.ifo.de/DocDL/ifo_Dresden_Studien_66.pdf
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    References listed on IDEAS

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    4. Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
    5. Stuart, Charles E, 1984. "Welfare Costs per Dollar of Additional Tax Revenue in the United States," American Economic Review, American Economic Association, vol. 74(3), pages 352-362, June.
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    Cited by:

    1. Alfred Bauer & Florian Dorn & Luisa Dörr & Stefanie Gäbler & Manuela Krause & Martin Mosler & Christiaan Niemeijer & Horst Penzkofer & Niklas Potrafke, 2019. "Regional Economic Impact of Memmingen Airport on Tourism," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 100, September.
    2. Michael Kloß & Oskar Krohmer, 2012. "Zur Ermittlung der Selbstfinanzierungsquote von staatlichen Förderprogrammen," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 19(03), pages 05-11, June.
    3. Holtemöller, Oliver & Brautzsch, Hans-Ulrich & Drechsel, Katja & Drygalla, Andrej & Giesen, Sebastian & Hennecke, Peter & Kiesel, Konstantin & Loose, Brigitte & Meier, Carsten-Patrick & Zeddies, Götz, 2015. "Ökonomische Wirksamkeit der Konjunktur stützenden finanzpolitischen Maßnahmen der Jahre 2008 und 2009. Forschungsvorhaben im Auftrag des Bundesministeriums der Finanzen," IWH Online 4/2015, Halle Institute for Economic Research (IWH).
    4. Julia Sonnenburg & Jan Kluge & Robert Lehmann & Christian Ochsner & Joachim Ragnitz, 2014. "Strukturanalyse derostdeutschen Chemieindustrie," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 74, May.

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    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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