Globalization and Public Administration: A Complex Relationship

Abstract

The article examines the relationship between globalization and public administration through economic theory principles and an example. Starting from the consideration of early concerns about globalization, it argues that although the size of government has rarely declined, its power has been eroded, making room on the one hand to the quest for global public goods, while on the other hand advocating for more local public goods and decentralization. University education, mainly publicly supplied in Italy as well as in many European countries, exemplifies the awkwardness of introducing best practices in a context of asymmetric information with many idiosyncratic features.

Keywords:

• globalization
• public administration
• public goods
• university education

Notes

¹Since public administration is identified as the management of government policies, in the following sometimes public sector and public administration may be taken as synonymous.

²In addition, Baumol (1967) argues that governmental services are mainly provided by means of labor-intensive practices where labor-saving technological progress—for various reasons ranging from lack of investment to rent seeking inclinations—is very slowly adopted.

³No allocation may be optimal (more precisely: the optimum cannot be defined) when some room is left for exemptions.

⁴Globalization, as free movement of goods and factors has indeed changed the availability of the tax base: due to competition reasons, the more a good is tradable, the less taxes may be levied on it, while the more a factor is mobile, the less it may be taxed, lest it moves away. A shift in tax composition has therefore occurred: less taxes upon mobile capital, more taxes on immobile labor. Yet, more taxes on labor translates into higher labor costs (or wage reductions) which implies a less internationally competitive production and eventually more unemployment.

⁵Consumption is non-rival if it can be expanded to an additional consumer at zero marginal cost. The implications are that

1. By pricing the good at its marginal cost, a zero price and thus no incentive to private production follow, and

2. Limiting the consumption of a non-rival good is undesirable.

⁶Since profits cannot be (fully) appropriated by the producer, the production of a non-excludable public good is un-worth by the private sector and so its supplied quantity is suboptimal.

⁷Less simple cases either refer to government indirectly providing public goods through the private sector, or publicly providing private goods (e.g., through state firms).

⁸The term, introduced in 1992 by the Treaty on the European Union (i.e., Maastricht Treaty), refers to the principle whereby government actions should be undertaken at the lowest possible level and moved to a higher level only in presence of advantages that can only be reaped at that level. The principle has mainly being interpreted as the EU refraining from embarking on actions in areas where individual member states' actions are sufficient.

⁹Through the Nomenclature of Territorial Units for Statistics (NUTS) the EU Commission developed a standard denoting member states (NUTS0) and their subdivisions (NUTS1, 2, etc.) which may or may not coincide with pre-existing administrative units: regions, provinces, etc.

¹⁰A principal-agent problem arises when complex tasks need accomplishment by the agent, while, on the part of the principal, monitoring is very unsatisfactory.