Critique on earmarking, Microeconomics

Assignment Help:

Critique on Earmarking

Studying the working of earmarking in many OECD (organisation of economic  cooperation and development) countries, Potter and Diamond (1999) pointed out that to ensure comprehensiveness and transparency, it is necessary to design a budget system with three key characteristics, viz. annuality, unity and universality. They point out that these three characteristics are essential to ensure that all proposals for government expenditure are forced to compete for resources. A positive point which emerges from this argument is that efficiency in expenditure should be ensured by proper targeting among the fund seeking institutions and establishments. By this argument, funding is given not as a subsidy but as an earmarked grant targeted to ensure efficient spending.

The characteristic of anuuality requires that the budget should be prepared every year, covering only one year, which is voted and executed every year based on performance and efficient spending. However, it is also criticised that the three principles are derived mainly from the macroeconomist’s concern for budgetary control with the fear that extra-budgetary funds (EBFs) into which earmarked funds are placed might diminish the government’s ability to control resource allocation. The guidelines of two major international financial institutions (IMF and World Bank) note that ‘EBFs generally refer to accounts of government transactions that are not included in budget totals and usually do not operate according to budgetary execution procedures. In other words,they are often set up and used for reasons not consistent with the principles of good governance’. Nonetheless, it is conceded that the case for earmarking is strong as it is not the existing financial resources that are earmarked, but new resources that are mobilised for the sake of primary education.

In an inter-country comparison on the tuition fees charged by different countries, Johnstone (2003) estimates that the cost of higher education in terms of tuition fees charged is far less in India than in many other countries (Table 16.12). It, however, needs to be noted that it does not reflect for the recent increases in the fees charged by institutions of higher learning. In addition, there is the more important factor of accessibility of higher education which is limited to about 7 per cent of relevant age-group in the Indian context. It is argued that developing countries require a rapid growth of good quality higher education for their very survival in the highly competitive globalised world. In this context, it is generally accepted that only those countries which are able to ensure a 20 per cent enrolment in higher education could become economically advanced. However, such an expansion backed only by low quality private funding (as in the case of most South American countries) has worked against the interests of development. It is relevant to note that even in a country like U.S. which is a high income market economy, expenditure on higher education to the extent of 80 per cent is made by public funding.

In several other advanced countries, higher education is supported by the state to the extent of 55-93 per cent of the total expenditure. For example, UK, Germany, Italy, Denmark, Austria, Netherlands and Sweden met more than 90 per cent of the expenditure on higher education in 1995. Canada, France and Hungary met between 80 to 90 per cent of the cost on higher education and Australia, Ireland, Spain, Mexico and Israel met between 70 to 80 per cent. As below table, in the late 1980s, in India, the corresponding proportion was between 75 and 80 per cent.

Table: Range of Tuition Fees (US $) Charged in Institutions of Higher Education

2270_Critique on Earmarking.png


Related Discussions:- Critique on earmarking

Define injections and withdrawals, Define injections and withdrawals.  ...

Define injections and withdrawals.   "The inflows in circular flow of income are known as injections". Investment, government spending and exports are there in injections "The

Theory of consumer behavior, THEORY OF CONSUMER BEHAVIOR: It is genera...

THEORY OF CONSUMER BEHAVIOR: It is generally observed that market aggregate demand curve for a commodity is downward sloping, given other things. Our problem is to investigate

Determination of fixed exchange rate, DETERMINATION OF FIXED EXCHANGE RATE:...

DETERMINATION OF FIXED EXCHANGE RATE: In the flexible exchange rate regime, exchange rates are highly volatile which leads to uncertainties in the international payments/trans

Long run economic profits, 1. Igora's pizzeria want to know if it should st...

1. Igora's pizzeria want to know if it should stay open this spring. Total Revenue will be $ 12,000 per week and Total Cost will be $ 18,000 per week. The fixed cost of running the

Visit to village panchayat for agricultural based project., related documen...

related documents, photos,paper for permission from court etc.

Managerial economics, Below are the two estimated cost functions. describe ...

Below are the two estimated cost functions. describe what type of data was most likely used to estimate each one and why. Explain which is a short- run function, determine the leve

Unemployment, unemployment is voluntary, discuss in view of the classical e...

unemployment is voluntary, discuss in view of the classical economists and the keynesian

Perfect competition, Perfect competition: The behaviours of firms in p...

Perfect competition: The behaviours of firms in perfect competition. It should be noted that firms that fit into perfect competition model are very rare in real-life situation

Monopoly, Let''s assume that a monopolist decides to maximize revenue, rath...

Let''s assume that a monopolist decides to maximize revenue, rather than profit. How does this operating objective change the size of the deadweight loss?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd