Decomposing demand for public expenditure in Ireland

Abstract

This article, via the analysis of stated preferences from a nationwide representative survey of 1149 adults, examines the determinants of preferences for overall government expenditure and estimates a Seemingly Unrelated Regression model of demand for the three major categories of public expenditures in Ireland, namely, social welfare, education and health. Those on higher incomes are less in favour of government expenditure overall. However and consistent with the available evidence on the utilization and financing of the three main categories of government expenditures, decomposing the preferences demonstrates that those on higher incomes are particularly less in favour of social welfare expenditure but more in favour of spending on health and education.

Notes

¹ Irish education is predominantly (over 90%) funded by the public sector. See OECD, Education at a Glance, various years and Newman (2005) for further details on Irish education.

² Layte and Nolan (2004, p. 132) also note that, ‘Decomposing this overall measure of health utilization we found that inpatient and outpatient services in hospitals were essentially neutral in their distribution across income groups whereas use of GPs and number of prescriptions filled were significantly skewed toward the lower end of the income distribution. Use of dental and optician services on the other hand were significantly skewed toward the more advantageous income groups after standardisation’. Although increasing, Ireland's expenditure on health is relatively small. Public expenditure accounts for over 80% of total health expenditures in Ireland, with general taxation funding approximately three-quarters of health expenditures. See also Nolan (2005) for further details on Irish health.

³ See Wagstaff et al. (1999).

⁴ Pre-testing took the form of an on-line survey of 298 respondents, mainly undergraduate and postgraduate students. Lansdowne Market Research also conducted a number of pilot-tests on the scales used in the survey in order to reduce unnecessary complexity and encourage interview completion.