Visibility of Burdens and Benefits of Public Revenue and Expenditure in OECD Countries with Two and Three Levels of Territorial Government

The size and pattern of any public budget depend, among other factors, on the visibility of both the burdens and benefits of public revenue and expenditure. Furthermore, such visibility is a necessary - not a sufficient - condition for an efficient allocation of resources between the private and public sectors of an economy. Although the importance of this visibility has been well known by academicians and practitioners for a long time, attempts to quantify it by taking the internal structure of every type of revenue and expenditure and its relative financial weight in a fiscal system into consideration are recent, and indicators used till now rest on several structural parameters, each of them ranging from to 1, which are combined in a multiplicative way. For this reason a estimate has always resulted as anyone of such factors was also 0. Starting from the same parameters, factors, and initial values, an alternative and more fruitful way to measure visibility of burdens and benefits of a public budget can consist of combining them in an additive instead of a multiplicative way. Then a null parametric value does not result in a estimate, and calculations can show higher final values which could be much more sensitive to the initial values of other parameters and factors. After six years of research in the scientific speciality of Fiscal Federalism, the aim of this contribution is to present, for the first time, new additive indicators applied to local, intermediate, and central territorial government levels in Austria, Canada, Germany, Spain, Switzerland, and USA, and to compare them with estimates for the local and central territorial government levels in the remaining OECD countries (Australia, Belgium, Canada, Czech Republic, Denmark, Finland, France, Greece, Hungary, Ireland, Island, Italy, Japan, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Portugal, Sweden, Turkey, United Kingdom), by using data and essential information provided by the International Monetary Fund. The concurrence of several factors (such as non-coerciveness, non-existence of specific requitals, lack of information on concepts and quantities, partial shifting of burden by tax-payers, intergovernmental grants, etc.) explain why burden visibility values are still lower than 100.00. On the other hand, burden visibility values for the consolidated central government are higher than those estimated for the intermediate and local levels of same countries, mainly owing to significant grants received by the subcentral public administrations from central public administrations. Policy implications of these new estimates are straightforward for OECD countries: as both present revenue and benefit visibility are not near to 100.00 en general, allocation improvements could be obtained by implementing changes and reforms to raise values in general and by approaching these two types of budget visibility to such an optimal value. Other general and significant conclusions are offered for re-organization of territorial levels of governmnent in every country, devolution of powers, accountability, and optimization of sizes and patterns of public budgets.