Problem

Internal inefficiency of public programmes

Nature:
The mix of inputs in publicly provided services is often inefficient, namely the same funds could achieve more if they were reallocated. One aspect of this is that administrators of centralized tax-supported systems have to set norms on budgetary allocations for key inputs. These norms may not match the institutions needs or the community's preferences but the recipients may well have neither the financial power nor the incentive to change them. This is exacerbated when centralized systems are slow to adjust to resource scarcities - leading them to underfund non-labour recurrent costs. Another form of inefficiency arises when, for lack of an appropriate price signal, demand fails to match supply. When demand cannot be met, institutions resort to rationing by queue, namely long waiting times in government facilities.
Problem Type:
F: Fuzzy exceptional problems
Date of last update
01.01.2000 – 00:00 CET