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Public sector efficiency in the design of a euro-area social benefit scheme

Sijuola Orioye Olanubi, Oluwanbepelumi Esther Osode and Abiodun Adewale Adegboye

Journal of Policy Modeling, 2020, vol. 42, issue 3, 615-627

Abstract: This study examines the importance of public sector efficiency in the design of a euro area-wide social benefit scheme. Our results reveal large-scale inefficiencies in the use of funds allocated to the scheme during the great recession and euro area sovereign debt crisis that followed, with member states wasting on average 34.6% of funds allocated to it. We therefore propose that to ensure the smooth functioning of the scheme, the fiscal union will first of all have to strengthen it at the national level by improving efficiency in the use of funds by governments. We show that this can be achieved by providing a framework for the transfer of the “critical success factors” in the policies implemented by the most efficient administrations. Furthermore, we show how public sector efficiency considerations can help ameliorate the problem of moral hazard associated with a centralized insurance scheme.

Keywords: Fiscal union; Public sector efficiency; Social benefit scheme; Policy transfer; European fiscal integration (search for similar items in EconPapers)
JEL-codes: F36 F42 H53 F55 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:42:y:2020:i:3:p:615-627

DOI: 10.1016/j.jpolmod.2019.10.001

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