Government¶
Purpose and Perspective¶
The Government sector represents sources of government revenue and how total government expenditure is allocated among various possible uses, based on standard accounting identities. Expenditure is organized both according to a macroeconomic classification (i.e. between consumption, investment, and transfers), and to a functional classification (i.e. based on the type of service provided). The amount of expenditures for education, health, agriculture, infrastructure and many other interventions (not represented in the diagram for simplicity) represent major policy variables that the user can set as desired % of GDP or per capita level.
Funds allocated to “administrative and other expenditure” only have a macroeconomic effect in the model (affect the overall level of investment and consumption), and do not have any effect in improving public services.
Model Structure and Major Assumptions¶
Government revenue includes direct taxes, indirect taxes, non-tax revenue, and grants [1]
Government expenditure includes subsidies and transfers, interest payment, administrative and other expenditure, education expenditure, health expenditure, agriculture expenditure, infrastructure expenditure and several other items of expenditure direct to provide specific public services.
Exogenous Input Variables¶
Administrative and other expenditure as share of gdp - Units: Dmnl
Agriculture expenditure as share of gdp - Units: Dmnl
Consumption share of government expenditure - Units: Dmnl
Education expenditure as share of gdp - Units: Dmnl
Grants as share of gdp - Units: Dmnl
Health expenditure as share of gdp - Units: Dmnl
Marine areas protection expenditure as share of gdp - Units: Dmnl
Other domestic revenue as share of gdp - Units: Dmnl
Per capita administrative expenditure - Units: Rlcu/(Person*Year)
Per capita subsidies and transfers - Units: Rlcu/(Person*Year)
Reforestation expenditure as share of gdp - Units: Dmnl
Salaries and wages as share of consumption - Units: Dmnl
Subsidies and transfers as share of gdp - Units: Dmnl
Target agriculture expenditure per hectare - Units: Rlcu/(Ha*Year)
Target education expenditure per school age person - Units: Rlcu/(Person*Year)
Target health expenditure per capita - Units: Rlcu/(Person*Year)
Target marine areas protection expenditure per capita - Units: Rlcu/(Person*Year)
Target reforestation expenditure per capita - Units: Rlcu/(Person*Year)
Target terrestrial areas protection expenditure per capita - Units: Rlcu/(Person*Year)
Target transportation infrastructure expenditure per capita - Units: Rlcu/(Person*Year)
Target waste management expenditure per capita - Units: Rlcu/(Person*Year)
Target water and sanitation expenditure per capita - Units: Rlcu/(Person*Year)
Taxes on goods and services as share of gdp - Units: Dmnl
Taxes on income and profits as share of gdp - Units: Dmnl
Taxes on international trade as share of import - Units: Dmnl
Terrestrial areas protection expenditure as share of gdp - Units: Dmnl
Transportation infrastructure expenditure as share of gdp - Units: Dmnl
Waste management expenditure as share of gdp - Units: Dmnl
Water and sanitation expenditure as share of gdp - Units: Dmnl
Initialization Variables¶
None
Modeling Details¶
Since government financing is the residual in government accounts, there are not explicit limits to the level of expenditure the government can sustain, and any imbalance in government accounts is always financed through domestic or foreign sources.
This is not the only type of closure that can be used in the model: total expenditure levels can be residual, and the level of financing fixed to certain acceptable levels. The two types of closure have different advantages and disadvantages.
The first type of closure leaves more freedom to the user to experiment with different levels of government expenditure. On the other hand the user has to continuously monitor that the level of financing and debt generated in the simulations is acceptable.
The second type of closure offers less freedom to the user in determining the level of expenditure for the various items: total expenditure is automatically set to respect a certain acceptable level of deficit. However, in this case the user does not have to continuously monitor the deficit level.
