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Labour Taxation and Personnel Expenditure in the Romanian Public Sector

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Listed:
  • Maria-Andrada Georgescu
  • Dana Mihaela Murgescu

Abstract

The global economic crisis, which had a strong impact on virtually all states of the world, brought additional challenges to the public sector. The governments had to choose between two alternatives: to decrease public expenditure by adopting austerity measures (option chosen by most EU Member States) or to increase public investments, in an attempt to stimulate economic growth (alternative preferred and supported by the US and Great Britain). The paper at hand aims to analyze the public expenditure policy in Romania, as a result of the economic conditions imposed by the crisis, with a focus on the relationship between the incomes collected from taxes on labour and the public expenditure with the personnel employed within public institutions. We shall analyze and compare the figures regarding public expenditure for the wages of persons working in the public sector in the years prior to the crisis and following the adoption of the austerity measures. At the same time, we shall analyze the corresponding numbers regarding the amounts collected from taxes on labour. The goal of the paper is to identify the possible connection between the reduction of personnel expenses and the decrease of the budgetary deficit, which was the intended purpose of the austerity measures in the field of public employees' salaries. Since the labour tax is computed on the basis of the salary earned, we expect both the expenses with the personnel and the amounts collected from labour tax, to decrease. However, this decrease will be in different percentages. The paper will analyze if the final balance between expenses with salaries and labour tax is positive or negative, in other words, if the austerity measures helped improve the budgetary deficit or deepened it. The final part of the research focuses on a comparative analysis between the EU Member States, with respect to the levels of taxation on labour, the percentage of labour tax in the GDP, and the public expenditure with the personnel, in an attempt to show if there are certain similarities or differences between EU and/or NISPAcee States.

Suggested Citation

  • Maria-Andrada Georgescu & Dana Mihaela Murgescu, 2011. "Labour Taxation and Personnel Expenditure in the Romanian Public Sector," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2011(2), pages 48-71.
    • Handle: RePEc:prg:jnlefa:v:2011:y:2011:i:2:id:33:p:48-71
    DOI: 10.18267/j.efaj.33
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    References listed on IDEAS

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    1. Tim Callan & Brian Nolan & John Walsh, 2011. "The Economic Crisis, Public Sector Pay and the Income Distribution," Research in Labor Economics, in: Who Loses in the Downturn? Economic Crisis, Employment and Income Distribution, pages 207-225, Emerald Group Publishing Limited.
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    More about this item

    Keywords

    Economic crisis; Labour taxation; Public expenditure;
    All these keywords.

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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