73041 POVERTY THE WORLD BANK REDUCTION AND ECONOMIC MANAGEMENT NETWORK (PREM) Economic Premise JUN 2012 OCTOBER 010 • Numbe 91 • Number 18 Fiscal Policy for Growth and Development Milan Brahmbhatt and Otaviano Canuto The global economic crisis that broke out in 2008 has reawakened interest in fiscal policy. In the early stages of the crisis, there was a widespread turn to countercyclical fiscal stimulus. Furthermore, the recent euro area crisis has underlined the importance of long-term fiscal sustainability for macroeconomic stability. More subtly, the global crisis has also refocused interest in fiscal policy as an instrument for longer-term growth and development. In the potential “new normal� of continued sluggishness in the advanced world, developing countries have strong incentives to seek out new domestic engines for efficiency and productivity growth, as well as for greater equity in development. The poten- tial of fiscal policy to promote these ends is therefore of great interest to developing country policy makers. This note1 focuses on that potential and provides an overview of how fiscal positions in developing countries have evolved in the wake of the crisis, as well as some emerging policy lessons. It then sketches a conceptual framework for thinking about the connections between fiscal policy and longer-term growth and development. Finally, this note highlights some findings about the connections between fiscal policy and development. Context, Recent Trends, and Lessons from There was also a swing to greater countercyclicality in the the Crisis fiscal policy stance of many economies, in contrast to the past, when policy in most countries was procyclical, expanding fis- Developing countries entered the recent crisis in a much cal stimulus during booms and reducing it during downturns stronger macroeconomic and financial position than in the and recessions. Frankel, Vegh, and Vuletin (2011) estimate past. In general, they had much smaller fiscal and current ac- that the proportion of developing countries pursuing counter- count deficits, lower inflation, higher international reserves, cyclical fiscal policies increased from less than 10 percent in more flexible exchange rates, lower public and external debt, 1960–99 to over one-third in 2000–2009.3 Many were able and less financial sector vulnerability (Canuto and Giugale to increase real government spending in 2009, at the depths of 2010; Kose and Prasad 2010).2 Among middle-income coun- the recession, despite weaker fiscal revenues, in contrast to ear- tries, the median ratio of general government debt to gross lier crises, when countries often had to cut spending, not least domestic product (GDP) almost halved, while in a sample of on investment projects and social expenditures. Countries low-income countries (LICs), it fell even more precipitously, that had greater fiscal space before the crisis were able to un- aided by substantial debt relief (figure 1). dertake more significant increases in countercyclical fiscal 1 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise stimulus (Aizenmann and Jinerak 2010; IMF 2010a, 2010b). Fiscal multipliers are also found to be smaller for more How effective were countercyclical programs in develop- open, trade-dependent economies (because of greater import ing countries in bolstering short-term growth during the re- leakage), and even to be negative in the long run for econo- cent crisis? One of the results emerging from recent debates mies with high public debt. Concerns about fiscal sustainabil- over the effectiveness of countercyclical fiscal policy is that it ity are perhaps less of a constraint on a short-term fiscal stim- is likely to be context dependent on the structure of the econ- ulus in view of the great fall in public debt–to-GDP ratios in omy and its overall macroeconomic policy regime. DeLong developing countries in the years leading up to the crisis. Nev- and Summers (2012) note that what they call the “policy-rel- ertheless, median debt ratios have risen by almost 10 percent- evant fiscal multiplier� depends in particular on how mone- age points since the start of the crisis in middle-income coun- tary policy reacts to fiscal policy shocks. In normal times, tries (MICs), and they remain over 55 percent in about monetary policy will be the primary tool for macroeconomic one-quarter of developing countries (figure 2). stabilization and will tend to offset fiscal policy shocks, so The case for countercyclical fiscal stimulus will therefore that estimates of the fiscal multiplier will be quite small. In a depend on the individual circumstances of each developing depressed economy, however, monetary policy may be much country. However, short-term stabilization should not be the more accommodating of fiscal stimulus, and the policy-rele- only or primary lens through which developing countries as- vant fiscal multiplier then would be much larger. sess the usefulness of fiscal policy. Its role in addressing key Ilzetzki, Mendoza, and Vegh (2010) estimate that fiscal market failures, improving resource allocation and efficiency, multipliers in developing countries are generally much small- increasing the long-run growth properties of the economy, er than in developed countries, and also document the depen- and addressing issues of distributional equity and social in- dence of multipliers on the structural and macroeconomic clusion is likely to have at least as large, if not a greater, influ- context. There is a clear difference between countries with ence on social welfare over the long haul. flexible exchange rates, where multipliers are essentially 0, Fiscal Policy for Growth and Development: and those with predetermined exchange rates, where multi- A Framework pliers are over 1. This gap reflects different monetary policy under the two exchange rate regimes. Under predetermined A simple framework may help to organize some of these is- exchange rates, monetary policy is passive and obliged to ac- sues. First, what are the development objectives to which fiscal commodate fiscal policy. Under flexible exchange rates, it is policy should contribute (figure 3)? Growth is clearly one, autonomous and able to offset fiscal policy shocks. These re- though policy makers may want to go beyond the standard sults are in line with theoretical predictions from standard focus on GDP growth and consider broader measures of in- open economy macro models. Figure 2. General Government Debt, All Developing Countries, 2002–11 Figure 1. General Government Debt, Medians, 2002–11 120 100 90 LICs 100 MICs 80 high-income OECD 80 percent of GDP percent of GDP 70 60 60 50 40 40 20 30 0 20 02 03 04 05 06 07 08 09 10 11 20 20 20 20 20 20 20 20 20 20 04 05 06 07 08 09 10 02 03 11 20 20 20 20 20 20 20 20 20 20 75 percentile all developing, median Source: World Economic Outlook Database, International Monetary Fund. 25 percentile Note: LIC = low-income country; MIC = middle-income country; OECD = Organisation for Economic Co-operation and Development. Source: World Economic Outlook Database, International Monetary Fund. 2 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise come, or even expand the focus to growth in a comprehensive economic shocks that create large or persistent gaps between measure of wealth.4 Poverty reduction, social inclusion, and eq- aggregate demand and potential output, thereby helping to uity have complex links to growth, but also are rightly viewed avert both excessive cyclical unemployment and inflationary as independent development objectives, because the distribu- pressure. From a longer-run perspective, stabilization is also tional outcomes of market processes may not necessarily jibe concerned with keeping fiscal deficits and public debt on a with society’s normative views on equity. Finally, although sustainable path, so that public finances do not themselves be- sometimes overlooked, there is protection against risk and vul- come a source of macroeconomic instability. nerability to shocks, which, assuming that most people are risk As for the resource allocation rationale of fiscal policy, the averse, is also an element of social welfare. focus is on the potential for the government to improve eco- However, one cannot simply assume that there is a role for nomic performance through expenditure and tax policies a government in advancing these development objectives. that boost efficiency (technical and allocative) and improve There must be a clear rationale for public action rather than re- long-term development performance by dealing with critical lying on private markets or on the kinds of self-organizing, vol- market failures. For example, the government might spend on untary meso-institutions for collective action studied by Os- public goods such as law and order, justice, and basic infra- trom (1990). The traditional threefold rationale for fiscal structure, the supply of which also raises productivity and policy proposed by Musgrave (1959) is still useful: fiscal policy growth in the private sector. Market failures in this context should aim to promote macroeconomic stabilization, improve refer not only to the familiar issues of public goods, externali- resource allocation, and address distributional disparities. ties and increasing scale returns, but also to a variety of infor- The stabilization rationale has both short- and long-run mation failures and problems of missing markets that can, for aspects. The short-run aspect focuses on the possibility of us- example, lead to failures in private insurance markets, creat- ing countercyclical fiscal policy to offset the impact of macro- ing an efficiency rationale for social insurance policies. Figure 3. Fiscal Policy for Growth and Development: A Framework Development objectives Growth Social risk Equity (wealth, income) management Fiscal policy rationale • Macroeconomic stabilization • Resource allocation: address market failures • Distribution Instruments and institutions Constraints • Public spending levels, • Political economy and composition and efficiency institutional capacity • Tax policies and revenue constraints mobilization • Fiscal sustainability • Financing and public balance • Efficiency costs of taxation sheet and borrowing • Public �nancial management and governance of institutions Source: Authors’ illustration. 3 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise Finally, the distribution rationale underpins fiscal policies able to supply key goods or services that raise the productivity that aim to adjust the distribution of income, opportunities, of capital and labor in the private sector, such as infrastruc- assets, or risk that emerge from private market activity so that ture, research and development (R&D) or education, but it better reflects the ethical views endorsed by society. which the private sector itself is unable to provide in optimal There is no simple mapping from rationales to objectives. quantity or quality because of market failures. And yet rela- Fiscal policy undertaken under one or more rationales will tively little is known about the likely size of the growth effects typically affect all three development objectives. Thus, for ex- of various kinds of public spending, particularly in develop- ample, a reallocation of public spending toward roads with a ing countries. net positive effect on growth will also have implications for Estimating these effects is not easy because, for one thing, income distribution and social risk management. If, for ex- the benefits of a change in public expenditure need to be mea- ample, a new road links a poor remote area to the big city, it sured net of the effects of how the expenditure is financed. could improve the income possibilities for the poor (access to Most taxes generate distortions and efficiency costs. Public new markets, cheaper farm inputs), as well as their ability to borrowing and growing debt (representing future taxes) can cope with shocks (more diverse job opportunities, urban mi- affect growth as well. gration possibilities, and so forth). A road between two The number of empirical studies in developing countries wealthy cities might be even better for growth, but worse on that take proper account of the government’s budget con- the other two counts. straint is limited. Using an a priori definition of productive Even when fiscal policy has a clear rationale, key deci- spending that includes education, health, housing, transpor- sions must be made about the appropriate fiscal policy instru- tation, communication, general services, and defense, some ment to use, the financing or balance sheet implications of of these studies find that more productive expenditures do public spending or tax policies, and the institutions that are have a positive impact on growth if they are financed through available to implement such policies in practice, taking into reductions in other less productive expenditures or through account key constraints and linkages (figure 3). For example, relatively small fiscal deficits, or both. Financing through large how will changes in the composition of public expenditure or deficits appears to be associated with weaker or even negative tax structure affect growth and income distribution? The impacts on growth (Adam and Bevan 2005). Other studies taxes or borrowing needed to finance spending also have their break down government spending between capital and cur- own efficiency costs, and so the benefits of public spending rent spending. The effects of capital spending appear to also always need to be evaluated net of those costs. depend crucially on how it is financed. Several studies find In addition, as noted, fiscal policies need to remain sus- that there is no great growth payoff from boosting capital tainable if they are not themselves to become a source of mac- spending by cutting current spending—indeed, there may be a roeconomic instability. The government must remain solvent negative impact. This finding supports the idea that properly (able to pay off its debts at some future time), liquid (able to selected capital and current spending are complements rather meet its current outgoings), and credible (retaining the confi- than substitutes—for example, spending on operations and dence of investors in its solvency and liquidity). The effective- maintenance. ness of fiscal programs—for example, the efficiency with In terms of directions for future research, although gov- which revenues are raised, the cost-effectiveness of public ser- ernment can help overcome market failures, it can also gener- vice delivery, or how well public resources are protected from ate institutional failures that reduce incentives and produc- corruption and waste—all depend crucially on the quality of tivity in the private sector. In other words, empirical work in public financial management institutions in a country. In- this area will likely be affected by unobserved heterogeneity deed, the costs of government failures may even exceed the in governance, institutions, and the overall quality of public costs of the market failures the government is trying to ad- spending.5 dress. Political economy factors and institutional capacity in- Public Investment Management: Challenges timately affect a country’s ability to actually implement and Tools sound fiscal policies. The sections that follow briefly survey in a little more de- Perhaps the most important variable conditioning the impact tail some of the key themes linking fiscal policy and long-run of public spending is the quality of public investment man- growth and development. agement (PIM). A newly developed index of PIM quality shows that only about half of public investment expenditure Public Spending and Long-Run Growth in developing countries translates into productive capital It is now well understood that specific kinds of public expen- stocks (Dabla-Norris et al. 2011; Gupta et al. 2011). There is diture can make a significant contribution to the level and also evidence that public investment spending is higher in growth rate of economic output. The government may be countries in which institutional quality is lower because of 4 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise the opportunities for corruption and rent seeking it provides capital, but also natural capital. Standard economic measures (Keefer and Knack 2007). Poor governance thus leads to more of GDP and savings can be inadequate for indicating whether public resources being committed precisely in those circum- national wealth is indeed rising. Measures of adjusted net na- stances in which the resources are most likely to be squan- tional income and savings are needed, which, among other dered on poorly chosen, implemented, and managed public things, take into account the depletion of natural assets as a investments. form of depreciation, complemented by comprehensive mea- The institutional challenges of PIM include the assign- sures of the stock of wealth. ment of roles and responsibilities for the creation and mainte- To ensure that growth is sustainable in the long-run, re- nance of public assets across various agencies and levels of source-rich countries need to capture an efficient and fair government. Important issues here include how to achieve share of natural resource rents, and then invest that share ef- sufficient coordination between capital and current spending fectively to increase the country’s wealth. This is where fiscal on the operations and maintenance needed to keep assets policy and good public sector governance become essential. working effectively, and how to strike a balance between dif- Natural resource funds (NRFs) have long been advocated ferent stages of project selection and management. Budget as an important tool for securing and rationally managing the planning and execution of public investment projects are ide- use of government revenues from natural resources. NRFs are ally nested in the context of a medium-term expenditure a type of rules-based fiscal policy instrument intended to help framework (MTEF), which may help address problems aris- overcome political economy problems that favor excessive ing from excessive political discretion over projects, myopia, consumption and plunder of natural resource revenues. and see-saw or ratchet effects. Three traditional functions of NRFs are macroeconomic sta- New tools that hold promise for helping improve PIM in- bilization (to insulate the economy from large fluctuations in clude benchmarking tools such as the IMF’s Public Invest- resource prices and revenues), stable budget financing (to ment Management Index (PIMI) and the World Bank’s re- smooth out the government budget fluctuations), and more cently developed Public Expenditure and Financial optimal savings and investment (to preserve wealth for future Accountability (PEFA) diagnostic framework for public capi- generations). However, experience shows that NRFs only tal spending. Greater transparency is a powerful tool for im- work if they change the underlying incentives facing political proving public investment performance, particularly when actors. Here it is helpful to increase transparency and to coupled with mechanisms that allow stakeholders—civil soci- broaden accountability to include actors outside the execu- ety organizations, concerned citizens, the users of public in- tive—for example, the legislature, technical experts, and ap- frastructure, and contractors—to provide decision makers propriately qualified civil society organizations. with feedback. The development of information and commu- The government also faces difficult decisions on how nications technology can further enhance transparency and much of revenues to pass on to citizens directly through tax social monitoring. cuts or transfers and how much to retain in public hands; on how much of the public share to consume and how much to Fiscal Policy for Sustainable Development save and invest; and on how to allocate public investment op- in Resource-Rich, Low-Income Countries timally (for example, between holding foreign assets and en- Fiscal policy in resource-rich developing countries raises gaging in domestic public investments such as infrastruc- many distinctive issues. Taxation and royalties from natural ture). A strategy of boosting domestic public investment resources often become the main source of government reve- requires that countries “invest in their capacity to invest�— nue. International resource prices are highly volatile, tending that is, they appropriately appraise, select, and manage public to induce high volatility in government revenues and eco- investments so that potential high returns become a reality. A nomic activity. “Point source� natural resources, such as min- better PIM system increases productivity growth and thus erals and oil, become a tempting target for corruption, rent should have a continuing impact on growth, in contrast to re- seeking, and even for civil strife and war. Because natural re- forms that yield a one-off increase in the level of output. sources are depleting assets, a key question arises about how Analyzing the Distributive Effects of Fiscal much to consume today and how much to save for future gen- Policies: How to Prepare (Analytically) for erations. These problems are exacerbated in LICs, where gov- the Next Crisis ernance is weak and where present consumption demands by the poor are hard to resist.6 Aggregate cross-country studies typically find that the net im- Viewed in the context of capital and long-run growth pact of the crisis was to slow rather than reverse the ongoing theory, the key to increasing future living standards lies in in- decline in the global poverty rate. Some in-depth microsimu- creasing overall national wealth, which includes not only tra- lation studies that link macrolevel crisis impacts with detailed ditional measures of capital such as produced and human household survey data have produced additional interesting 5 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise findings. For example, households made newly poor by the In most African LICs, where automatic fiscal stabilizers crisis tended to have characteristics different from those of are limited, the principal fiscal impact of the crisis was a drop the structural poor; they were more urban, skilled, and less in government revenue. The main fiscal policy instrument reliant on agricultural income. However, there is relatively available was a discretionary change in expenditure. Govern- little information on the poverty and distributional effects of ments had a number of fiscal policy options available: adjust- specific fiscal policy decisions made during the crisis. ment, defined as a cut in spending in response to the revenue There are three main types of analytical tools that could drop; accommodation, defined as maintaining spending un- be used to understand the distributional implications of fiscal changed; and stimulus, defined as increasing spending not- policies. The first, conventional incidence analysis, is a rela- withstanding the revenue decline. The bulk of countries un- tively well-developed set of techniques to estimate how much dertook full or partial accommodation of revenue declines, of a given category of expenditure is received by a particular and some even undertook countercyclical stimulus. Only a group in society and how much taxation is borne by each small number undertook full adjustment in the face of reve- group. The second tool is tax-benefit simulation models. nue declines. The more fiscal space a country had built up These models allow analysis of the impact of economic shocks before the crisis, the less it had to undertake full adjustment or policy changes down to the level of a microdata sample of and the more options it had to accommodate the revenue heterogeneous households. The third type of tool is comput- shock or even undertake stimulus. able general equilibrium models, which in principle allow a How were countries in sub-Saharan Africa able to fi- flexible combination of micro- and macrolevel analysis. For nance accommodation or countercyclical stimulus? Official example, the MAMS model developed at the World Bank grants and concessional lending remained stable, and African draws on microlevel information about the determinants of LICs have also traditionally have had limited access to interna- outcomes in sectors such as health and education that it uses tional capital markets, which, in any case, became largely inac- as input for macro- and sectoral-level analysis of government cessible during the crisis. However, governments were able to policies. draw on domestic financial markets for the bulk of fiscal stim- There is no single superior technique, but rather there ulus financing. Such markets have grown over the last decade are trade-offs among the simplicity of data needs, analytical and were able to partly meet the financing challenge without assumptions, the readiness to implement, and the compre- much evidence of crowding out. Going forward, countries in hensiveness and richness of results to guide policy making. sub-Saharan Africa will need to ensure that the countercycli- There are additional tools that may help policy makers bet- cal increases in government spending undertaken during a ter prepare to address the distributional impacts of the next crisis do not contribute to a longer-term deterioration in fiscal crisis. The first is a simple qualitative questionnaire on fiscal sustainability. decisions implemented at the sectoral level in a given peri- Many countries wanted to protect public infrastructure od. The second tool is an approach to conducting ex ante programs that had been launched before the crisis with a microsimulations that focus on opportunities rather than on view to promoting long-term growth. The ability to do this outcomes in the hope that the traditional short-term analy- depended crucially on whether they had adequate fiscal re- sis of welfare outputs may be complemented with a discus- serves from the precrisis boom. In natural resource–depen- sion of the longer-term effects on equality of opportunity. A dent countries, this ability was linked to the presence of fiscal case study of Liberia traces the likely impacts of a theoretical rules (such as NRFs) that encourage saving resource-linked cut in educational spending on the probability of access to revenues during boom times. Where governments had little education for different individuals. This information fiscal space, spending cuts affected more public investment. should be useful in designing more effective policy respons- As for protection of the vulnerable, although well-targeted es to a crisis. cash transfers and public works are generally thought to be the most efficient tools in an LIC context, their use in sub- Fiscal Policy Lessons from the Global Crisis Saharan Africa has been limited and poorly coordinated. A in Africa few governments scaled up spending on such programs Many African economies saw significant improvements in where they were already in place. Other governments, how- economic and fiscal performance in the decade before the cri- ever, were tempted to adopt less efficient measures, such as sis. Over 70 percent of them were running primary fiscal sur- fuel subsidies or producer price supports, for specific export pluses (compared with less than 30 percent in the early commodities. 1990s); public debt–to-GDP ratios fell sharply, in part be- However, the actual execution of fiscal plans often lagged. cause of debt relief, but also because of domestic fiscal adjust- Actual expenditures were often lower than budget, so that ment; and many countries were experiencing higher growth the actual fiscal stance was less of a stimulant than intended. and expanding productive public and private investment. The need to improve budget and public investment manage- 6 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise ment is indeed one of the important lessons from the crisis in Aizenmann, Joshua, and Yothin Jinerak. 2010. “De Facto Fis- cal Space and Fiscal Stimulus: Definition and Assessment.� sub-Saharan Africa. An additional key lesson is the impor- Working Paper 16539, National Bureau of Economic Research, tance of maintaining a prudent, sustainable fiscal stance over Cambridge, MA. the medium term, particularly the need to build up fiscal Brahmbhatt, Milan, and Otaviano Canuto. 2010. “Natural Re- space during good times to have resources available during a sources and Development Strategy after the Crisis.� Economic crisis. Experience shows that it is often difficult to reverse dis- Premise, No. 1, World Bank. cretionary fiscal programs undertaken during a crisis, and so Canuto, Otaviano, and Marcelo Giugale, eds. 2010. The Day after Tomorrow: A Handbook on the Future of Economic Policy in the it is important for countries to build safety nets that are effec- Developing World. Washington, DC: World Bank. tive and affordable in the long run and to ensure that exit Dabla-Norris, Era, Jim Brumby, Annette Kyobe, Zac Mills, and strategies from temporary crisis programs are in place. Chris Papageorgiou. 2011. “Investing in Public Investment: An Index of Public Investment Efficiency.� Working Paper About the Authors WP/11/37, International Monetary Fund, Washington, DC. DeLong, J. Bradford, and Lawrence H. Summers. 2012. “Fiscal Milan Brahmbhatt is Senior Adviser in the World Bank’s Pover- Policy in a Depressed Economy.� Paper presented to Spring ty Reduction and Economic Management (PREM) Network. Ota- 2012 Brookings Panel on Economic Activity, March 20. viano Canuto is Vice President and Head of the Poverty Reduc- Frankel, Jeffrey, Carlos Vegh, and Guillermo Vuletin. 2011. “On tion and Economic Management (PREM) Network. Graduation from Procyclicality.� Working Paper 17619, Na- tional Bureau of Economic Research, Cambridge, MA. Notes Gupta, Sanjeev, Alvar Kangur, Chris Papageorgiou, and Abdoul Wane. 2011. “Efficiency-Adjusted Public Capital and Growth.� 1. This Economic Premise provides an introduction to the WP/11/217, International Monetary Fund, Washington, DC. forthcoming volume, Is Fiscal Policy the Answer? A Developing Ilzetzki, Ethan, Enrique G. Mendoza, and Carlos A. Vegh. 2010. Country Perspective (Moreno-Dodson forthcoming). Sub- “How Big (Small) Are Fiscal Multipliers?� Working Paper 16479, sequent Economic Premises will take up the findings of indi- National Bureau of Economic Research, Cambridge, MA. vidual chapters from this volume in more depth. IMF (International Monetary Fund). 2010a. “Emerging from the 2. Such a broad assessment is inevitably subject to individual Global Crisis: Macroeconomic Challenges Facing Low-Income exceptions. For example, several countries in Central and Countries.� October 5. Eastern Europe experienced major private sector credit ______. 2010b. “How Did Emerging Markets Cope in the Crisis?� June 15. bubbles financed by foreign borrowing. Keefer, Philip, and Stephen Knack. 2007. “Boondoggles, Rent- 3. Frankel, Vegh, and Vuletin (2011) define countercyclical- Seeking and Political Checks and Balances: Public Investment ity as a negative correlation between the cyclical components under Unaccountable Governments.� Review of Economics and of government expenditure and GDP. Statistics 89 (3): 566–72. 4. On such broader measures of income and wealth, see Kose, M. Ayhan, and Eswar Prasad. 2010. Emerging Markets: World Bank (2010). Resilience and Growth amid Global Turmoil. Washington, DC: 5. World Bank expenditure tracking surveys, for example, Brookings Institution Press. find large variations across countries in the extent to which Moreno-Dodson, Blanca, ed. Forthcoming. Is Fiscal Policy the An- public spending translates into actual public services or in- swer? A Developing Country Perspective. Washington, DC: World frastructure. Bank. 6. Also see Brahmbhatt and Canuto (2010) for a brief survey Musgrave, Richard. 1959. The Theory of Public Finance: A Study in Public Economy. New York: McGraw-Hill. of these issues. Ostrom, Elinor. 1990. Governing the Commons: The Evolution of References Institutions for Collective Action. Cambridge, UK: Cambridge University Press. Adam, Christopher S., and David L. Bevan. 2005. “Fiscal Deficits World Bank. 2010. The Changing Wealth of Nations: Measuring and Growth in Developing Countries.� Journal of Public Eco- Sustainable Development in the New Millennium. Washington, nomics 89: 571–97. DC: World Bank. The Economic Premise note series is intended to summarize good practices and key policy findings on topics related to economic policy. They are produced by the Poverty Reduction and Economic Management (PREM) Network Vice-Presidency of the World Bank. The views expressed here are those of the authors and do not necessarily reflect those of the World Bank. The notes are available at: www.worldbank.org/economicpremise. 7 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise