Title page
Contents
Abstract/Résumé 4
1. Introduction 7
2. Data and descriptive statistics 8
3. Estimating public spending reallocation 11
3.1. An econometric framework for net public spending reallocation 12
3.2. Public spending reallocation: governance and fiscal rules 13
4. Obstacles to reallocation: a bunching estimate 14
5. Public spending reallocation: convergence of public spending mix? 17
5.1. Measuring overall convergence 17
5.2. A non-universal convergence 20
6. Conclusion 21
References 23
Appendix 25
A. Data sources 25
B. Robustness checks: convergence of public spending mix 25
C. Control variables 28
D. Additional econometric specifications 30
E. Data 37
Table 1. COFOG level I: Descriptive statistics for the distribution of Δlog(yi,j,t) in nominal terms 9
Table 2. COFOG level I: Descriptive statistics for the distribution of Δlog(yi,j,t) in real terms 10
Table 3. Selected control variables 12
Table 4. Summary statistics for the distribution of βi,j per country ranked by reallocation from lowest to highest 13
Table 5. Correlation dispersion βi,j and quality of governance indicators 14
Table 6. Correlation dispersion βi,j and fiscal rules indicators 14
Table 7. Density gap at 0 by function 16
Table 8. Density gap at 0 by function (continued) 16
Table 9. Silhouette analysis 21
Table 10. Clusters for the periods 1997-2003 and 2013-2017 21
Table 11. Silhouette analysis 28
Table 12. Clusters for the periods 1997-2003 and 2013-2017 28
Table 13. Summary statistics for the distribution of γi1,j per country: working age (15-64) per pension age (+65) 29
Table 14. Summary statistics for the distribution of γi2,j per country: GDP per capita PPP 29
Table 15. Summary statistics for the distribution of γi3,j harmonised unemployment rate 30
Table 16. Summary statistics for the distribution of βi,j per country with no control variables 30
Table 17. Correlation dispersion βi,j and quality of governance indicators with no control variables 31
Table 18. Correlation dispersion βi,j and fiscal rules indicators with no control variables 31
Table 19. Correlation dispersion βi, and quality of governance indicators with no control variables 32
Table 20. Correlation dispersion βi,j and fiscal rules indicators 32
Table 21. Point estimates for regression (4) 33
Table 22. Point estimates for regression (4) (continued) 34
Table 23. p - values for regression (4) 35
Table 24. p - values for regression (4) (continued) 35
Table 25. Summary statistics for the distribution of βi,j per country using the the 2-step approach 36
Table 26. Correlation dispersion βi,j and quality of governance indicators using the the 2-step approach 37
Table 27. Correlation dispersion βi,j and fiscal rules indicators using the the 2-step approach 37
Table 28. COFOG I by country 37
Table 29. Number of observations per function 41
Figure 1. COFOG level I: Distribution of Δ log(yi,t), Total function, in nominal and real terms 10
Figure 2. COFOG level I: Dispersion and mean of Δ log(yi,j,t), in nominal terms 11
Figure 3. COFOG level II: Dispersion and mean of Δ log(yi,j,t), in nominal terms 11
Figure 4. Bunching at 0 for total public spending Δ log(yi,t) in nominal terms 15
Figure 5. Explained variance and number of components 18
Figure 6. Countries in the PCA1-PCA2 space for 1997-2003 19
Figure 7. Countries in the PCA1-PCA2 space for 2012-2017 19
Figure 8. Convergence of principal components across time 20
Figure 9. Explained variance and number of components 26
Figure 10. Countries in the PCA1-PCA2 space for 1997-2003 26
Figure 11. Countries in the PCA1-PCA2 space for 2012-2017 27
Figure 12. Convergence of principal components across time 27
Figure 13. Correlation between P90 - P10 and P75 - P25 32
Figure 14. COFOG level II: Number of observations per year 40
Figure 15. COFOG level II: Number of observations per country 40