Are governmental expenditures also sticky? Evidence from the operating expenditures of public schools

Tsing Zai C. Wu, Chaur Shiuh Young, Chun Chan Yu, Hsiao Tang Hsu

Research output: Contribution to journalArticle

Abstract

Existing research on cost stickiness focuses primarily on for-profit companies. This study investigates cost behaviour in the public sector, a new setting that deserves more research attention. Using unique data from public schools in Taiwan, we find that operating expenditures of public schools are sticky. Moreover, the stickiness is more prominent for schools whose principals facing higher enrolment pressure. These results support the public choice theory, suggesting that bureaucratic power may serve as a key driver leading to a sticky cost behaviour for governmental organizations. The government auditors and congressional representatives monitoring governmental budgets should thus notice that bureaucrats might keep the level of expenditures just for their self-interests when demand declines, a manifestation of distortion in allocation of social resources.

Original languageEnglish
JournalApplied Economics
DOIs
Publication statusAccepted/In press - 2019 Jan 1

Fingerprint

Public schools
Costs
Expenditure
Stickiness
Public sector
Government
Taiwan
Social resources
Monitoring
Public choice theory
School principals
Auditors
Enrollment
Bureaucrats

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Cite this

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Are governmental expenditures also sticky? Evidence from the operating expenditures of public schools. / Wu, Tsing Zai C.; Young, Chaur Shiuh; Yu, Chun Chan; Hsu, Hsiao Tang.

In: Applied Economics, 01.01.2019.

Research output: Contribution to journalArticle

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