the political economy of the regional allocation of public investment in greece 1 976-2004

The Political Economy of the Regional Allocation

of Public Investment in Greece 1976-2004

Dr Yiannis Psycharis Assistant Professor

Department of Planning and Regional Development, University of Thessaly, Greece

Aim of the paper

The pattern of regional allocation of Public Investment in Greece

The temporal evolution of regional allocation of Public Investment in Greece

The determinants of regional allocation of Public Investment in Greece

The paper aims to examine the spatiotemporal development of the Greek Public Investment Budget over the period 1976-2001.

The key issues addressed are:

The Major Determinants

Economic Social Political Geographical

The geography of public finance

Public finance is involved with the three essential questions: first, how is revenue raised, second, how is public expenditure allocated to finance public

goods and services, and third, what is the balance between revenue and expenditure.

The geographical analysis of public finance places the emphasis on the spatial pattern of revenue-raising, the spatial pattern of public expenditure, and the spatial balance between revenue and expenditure.

In Britain, the debate over devolution has thrown up specifically spatial questions about the present distribution of public expenditure in order to determine who gets what, where.

Literature Review

Initial Contributions Buchanan (1949), (1950), (1952) Musgrave (1959), (1983) Scott (1952), (1964) Samuelson (1954) Tiebout (1956) Oates (1972), (1991) Nordhaus (1975), (1989) Bennett (1980)

Contemporary Contributions Heald (1980), (1994), (1999) Short (1978), (1981) MacKay (1993), (1996), (2001) Gramlich (1977) Ladd (1990) Anderson and Tollison (1991) Wallis (1996) Oates (1998), Collective Volume

Statistical Data and Sources

The Greek Public Investment Budget is part and parcel of the Greek Annual Budget. It forms a very important constituent of the Public Budget and of course is approved by the Parliament.

It brings the most updated time-series of primary data for the period referred above. The data have been deflated at constant 1970 prices.

They are broken down at the prefectural level.

The year 2000Ordinary Budget expenditure: 32.0% of GDPPublic Investment Budget: 4.7% of GDP

GREECE’S TIERS OF LOCAL GOVERNMENT AND DECENTRALIZED STRUCTURES

Perifereia3rd tier of decentralization (regional level)13 Perifereies – Regions

Non-existent till 1986 Legislated for in 1986, but not fully functional till 1997 Since 1997 fully functional with a centrally-appointed

General Secretary (Periferiarchis) and co-opted members participating in the Regional Council

Nomos 2hd tier of self-government (prefectural

level)51 Nomoiwhich are grouped into50 Nomarchiakes Self-government

organizations.

Led by a single government-appointed Prefect (Nomarchis) till 1982

Increased participation with co-opted members in the Prefectural Council established in 1982. Prefect remains centrally appointed

Fully elected tier of self-government since 1994.

Demos1st tier of self-government (local level)1.033 Demoi – Municipalities

Fully elected throughout the period studied Underwent drastic amalgamation in 1999 in a process

of municipalisation (5825 previously existing municipalities and communes (438 and 5387 respectively) were reduced into 1033 municipalities and communes (900 and 133 respectively)

The choice of Prefectures as the base Unit for our Analysis

51 Prefectures (NUTS III level) Prefecture is a key feature of the Greek

political, administrative and planning structure and also the base unit for constituencies

Map of Greece

Periodising of the Post-dictatorial Greek Governments

• 1976-1981 New Democracy Party - Liberal Party

• 1982-1989 PASOK - Socialist Party • 1982-1985 PASOK- Socialist Party

• 1986-1989 PASOK- Socialist Party

• 1990-1993 New Democracy Party - Liberal Party

• 1994-2000 PASOK - Socialist Party • 1994-1996 PASOK- Socialist Party

• 1997-2000 PASOK- Socialist Party

Step towards to the European Integration

• 1981 Entry to European Economic Community

• 1985-1988 Mediterranean Integrated Programs

• 1989-1993 First Community Support Framework

• 1994-1999 Second Community Support Framework

• 2000-2006 Third Community Support Framework

• 2001 Entry to the European Monetary Union (EMU)

Financial Recourses of Greek Public Investment Budget

Public Investment Budget1980-2003

0

1000

2000

3000

4000

5000

6000

7000

8000

1960 1970 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Borrowing transferd to Public EnterpricesBorrowingEU Structural FundsOwn resourcesTOTAL

at constant prices 1999in million euros


0%

20%

40%

60%

80%

100%

1960 1970 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Borrowing transferd to Public EnterpricesBorrowing

EU Structural FundsOwn resources

Return

lines

1976-1981: The establishment of the Democracy (New Democracy Party in Power)

Prefectures(Nuts III)Greece =100

0

100

200

300

400

500

0 50 100 150 200 250

GDP per capita 1976

PI

per

cap

ita 1

976-

81

Public Investment (PI) Gross Domestic Product (GDP)

per capita in percentage of average

per capita in percentage of average

Unit

Greece Attiki

Share (%)

Greece Attiki

Share (%)

Prefectures (NUTS ΙII) 1976-1981 1976-1981 1976 1976

Greece 100.0 91.2 100,0 100.0 84.8 100.0

Evros 243.5 222.0 1 3.7 4 74.1 62.8 37 1.1 20

Evrytania 217.9 198.7 2 0.6 38 54.4 46.1 51 0.1 51

Serres 197.7 180.3 3 4.0 3 88.3 74.9 21 1.8 9

Ileia 182.4 166.4 4 3.0 5 89.8 76.1 19 1.5 14

Ioannina 158.7 144.8 5 2.4 7 71.7 60.7 42 1.1 22

Attiki 109.6 100.0 17 37.9 1 118.0 100.0 2 40.8 1

Thessaloniki 72.5 66.1 35 6.5 2 101.9 86.4 7 9.1 2

Imathia 55.4 50.6 47 0.8 30 106.0 89.9 6 1.5 16

Karditsa 55.2 50.4 48 0.7 33 86.1 73.0 22 1.1 21

Kozani 53.7 49.0 49 0.8 28 101.2 85.8 8 1.5 13

Larisa 50.8 46.3 50 1.3 15 91.5 77.6 17 2.4 4

Trikala 45.9 41.9 51 0.6 36 72.1 61.1 41 1.0 25

Funds

1982-1989: The Socialist Era (Socialist Party in Power)


Per capita in percentage of average of

Per capita in percentage of average of

Unit

Greece Attiki

Share (%)

Greece Attiki

Share (%)

Prefectures (NUTS III) 1982-1989 1982-1989 1982 1982

Greece 100.0 122.2 100.0 100.0 94.5 100.0

Evrytania 333.3 407.1 1 0.8 42 74.3 70.3 44 0.2 50

Kefallinia 254.7 311.1 2 0.8 40 94.9 89.7 24 0.3 46

Voiotia 229.3 280.1 3 2.9 4 185.2 175.1 1 2.3 7

Rethymni 209.2 255.5 4 1.4 18 102.1 96.5 17 0.7 38

Evros 203.2 248.2 5 2.8 5 80.1 75.8 40 1.2 21

Attiki 81.9 100.0 43 28.4 1 105.8 100.0 12 36.6 1

Thessaloniki 69.2 84.6 47 6.3 2 96.6 91.3 20 8.7 2

Fthiotida 67.6 82.6 48 1.1 27 99.8 94.4 18 1.7 12

Imathia 67.1 81.9 49 0.9 33 108.8 102.9 8 1.5 17

Ileia 66.0 80.6 50 1.2 23 90.5 85.6 28 1.5 16

Korinthia 65.5 80.0 51 0.9 37 125.0 118.2 3 1.6 14


0

100

200

300

400

500

0 50 100 150 200 250

GDP per capita 1982

PI

per

capi

ta

1982

-89

Funds

1982-1985 & 1986-1989: The two Socialist Governments of the ’80s


0

100

200

300

400

500

0 50 100 150 200 250

GDP per capita 1982

PI

per

capi

ta

1982

-85


0

100

200

300

400

500

0 50 100 150 200 250

GDP per capita 1986

PI

per

capi

ta 1

986-

89

Funds

Changes in the spatial pattern between 1976-1981 and 1982-1989

Unit Change in ranking for Public Investment per capita

Prefectures (NUTS III) 1976-1981 1982-1989

Greece 16.03 25.41

Rethymni 13.94 30 53.16 4

Karditsa 8.85 48 30.38 24

Arta 9.99 42 30.37 25

Drama 11.95 34 34.03 19

Kastoria 11.59 36 32.47 23

Irakleio 9.88 43 26.56 31

Evvoia 10.87 40 27.69 28

Fokida 16.60 23 41.06 12

Aitoloakarnania 15.48 24 24.78 35

Argolida 17.13 19 26.99 30

Thessaloniki 11.62 35 17.59 47

Korinthia 11.05 38 16.64 51

Pella 23.38 8 30.26 26

Attiki 17.57 17 20.81 43

Serres 31.69 3 18.80 46

Ileia 29.24 4 16.76 50


Per capita In percentage of average

Per capita In percentage of average

Unit

Greece Attiki

Share (%)

Greece Attiki

Share (%)


Greece 100.0 144.9 100.0 100.0 93.6 100.0

Evrytania 423.2 613.0 1 1.0 35 79.2 74.2 36 0.2 50

Fokida 276.3 400.2 2 1.2 28 98.5 92.2 17 0.4 42

Grevena 270.8 392.3 3 1.0 38 71.6 67.1 44 0.2 49

Samos 257.1 372.4 4 1.1 32 81.0 75.8 33 0.3 44

Xanthi 227.3 329.2 5 2.0 12 77.6 72.7 38 0.7 35

Attiki 69.0 100.0 47 23.7 1 106.8 100.0 10 37.1 1

Imathia 66.0 95.6 48 0.9 42 106.4 99.6 11 1.4 16

Thessaloniki 65.0 94.1 49 6.0 2 103.4 96.8 13 9.6 2

Ileia 58.6 84.9 50 1.0 34 75.1 70.3 40 1.3 17

Korinthia 53.4 77.3 51 0.7 46 137.8 129.0 2 1.9 11


0

100

200

300

400

500

0 50 100 150 200 250

GDP per capita 1990

PI

per

cap

ita

1990

-93

1990-1993: The return of New Democracy Funds



Greece 25.41 11.73

Xanthi 24.68 36 26.65 5

Kerkyra 20.95 42 17.08 22

Fthiotida 17.19 48 11.32 34

Aitoloakarnania 24.78 35 16.16 24

Evros 26.56 31 9.82 42

Kefallinia 64.72 2 22.00 13

Evvoia 51.63 5 20.40 16

Messinia 42.10 11 16.76 23

Dodekanisos 38.07 15 14.88 27

Lasithi 38.95 14 14.88 26

Rethymni 53.16 4 19.46 18


1994-2000: The return of the Socialists Prefectures(Nuts III)Greece =100

0

100

200

300

400

500

0 50 100 150 200 250

GDP per capita 1994

PI

per

capi

ta 1

994-

00


per capita in percentage of average of

per capita in percentage of average of

Unit

Greece Attiki

Share (%)

Greece Attiki

Share (%)


Greece 100.0 101.6 100.0 100.0 89.3 100.0

Samos 203.3 206.5 1 0.7 37 82.6 73.8 31 0.3 44

Thesprotia 196.0 199.2 2 0.9 31 58.8 52.5 49 0.3 47

Preveza 185.6 188.6 3 1.1 25 70.7 63.2 39 0.4 40

Lefkada 182.0 184.9 4 0.4 51 68.8 61.4 41 0.1 51

Evros 177.2 180.0 5 2.2 6 95.9 85.6 20 1.2 22

Attiki 98.4 100.0 31 32.3 1 112.0 100.0 7 37.4 1

Thessaloniki 82.7 84.0 38 7.7 2 107.1 95.6 8 9.8 2

Evvoia 59.8 60.8 47 1.3 19 95.6 85.4 21 2.0 8

Larisa 56.8 57.7 48 1.5 15 91.4 81.6 23 2.4 5

Pella 55.7 56.6 49 0.8 35 96.4 86.1 17 1.3 20

Korinthia 51.9 52.8 50 0.8 32 112.5 100.5 5 1.8 11

Imathia 48.7 49.4 51 0.7 40 101.8 90.9 14 1.4 15

Funds

1994-2000


0

100

200

300

400

500

0 50 100 150 200 250

GDP per capita 1994

PI

per

cap

ita 1

994

-96


0

100

200

300

400

500

0 50 100 150 200 250

GDP per capita 1997

PI

per

cap

ita 1

997-

00

1994-1996 & 1997-2000: The two Socialist Governments of the ’90sFunds



Greece 11.73 27.08

Achaia 10.54 37 39.90 12

Fthiotida 11.32 34 39.77 13

Rodopi 15.47 25 42.86 7

Ileia 6.87 50 25.32 33

Attiki 8.10 47 26.66 31

Pieria 10.10 41 27.77 29

Chalkidiki 13.39 29 37.54 17

Zakynthos 18.31 20 42.37 9

Thessaloniki 7.62 49 22.39 38

Evros 20.40 16 48.00 5

Lakonia 11.57 33 16.93 45

Pella 10.55 36 15.08 49

Evrytania 49.63 1 39.46 15

Xanthi 26.65 5 34.64 20

Karditsa 18.13 21 22.89 36

Messinia 14.88 27 17.78 43

Ioannina 25.01 8 30.59 25

Fokida 32.40 2 30.47 26

Voiotia 24.84 9 18.02 42


The accumulation of Public Investment in Greece 1976-2001

Summary statistics

Index Public Investment (PI) in million euro at constant 1970 prices

Prefectures (NUTS ΙII) 1976-1981

1982-1985

1986-1989

1982-1989

1990-1993

1994-1996

1997-2000

1994-2000

1976-2001

Average 3.06 2.52 2.43 4.95 2.36 1.97 3.61 5.58 16.79

Standard Deviation 8.20 4.83 5.03 9.84 3.91 3.66 9.15 12.77 36.49

Max/Min Ratio 132.95 67.06 77.94 72.20 60.41 65.63 100.53 87.35 83.14

Coefficient of Variance 2.68 1.91 2.07 1.99 1.66 1.86 2.53 2.29 2.17

Weighted Coefficient of Variance 10.82 7.62 8.28 7.93 6.54 7.11 10.15 9.13 8.70

Per capita

Overview

Observing the transitions in the spatial distribution of public investments in Greece during the 1976-2001 period, a circle appears to have been completed.

Beginning from an intensely centralizing pattern for the spatial distribution of public investment, during the 1970s, which gave priority to the country’s urban development poles and selectively to certain agricultural or moderately urbanized areas, we passed, in the 1980s, to an intensely decentralizing and redistributive model with certain “clear” exceptions.

This pattern was extended into the first years of the 1990s. From the around the mid-point of the 1990s to 2001, a change

came about in the regional distribution pattern for the country’s public investment, characterized by the spatial concentration of public investments on the dynamic development poles and axes of the country. This pattern continued to apply during the first years of the new century. Attiki, Thessaloniki and Achaia and the links between them have played a catalytic role in the evolution of this pattern.

Concluding remarks

First, the level of underdevelopment of prefectures does not appear to have constantly and systematically constitute the principal criterion for the regional distribution of public investment in Greece during the 1976-2001 study period.

Summarizing four tentative conclusions can be drawn.

Concluding remarks

Second, the concentration of population and economic activity in the two large urban centres of the country acted catalytically on the regional distribution model for public investment in the country's prefectures. 50% of the country's population resides in Attiki or Thessaloniki, where 50% of the GDP is produced. Although per capita public investments in these two prefectures have fluctuated, in Attiki around average, and in Thessloniki below it, the absolute values have consistently comprised more than 30% and usually up to 45% of total public investment.

Concluding remarks

Third, the policy concerning the regional distribution of public investment that was followed throughout the study period does not seem to have been dictated by a higher-level strategic regional development plan. For this to have been the case the government should have been systematically monitoring and recording the public capital balance by department, noting potential gaps, the omissions, the inequalities and the needs and to distribute resources accordingly. Sadly, this was not the case. In contrast to this, the regional distribution of public investments seems to be dictated more by faltering, ad hoc interventions based on opportunistic and some times indeterminate criteria, rather than by coordinated interventions dictated by some well researched plan of recorded needs.

Concluding remarks

Last, but not least, the regional distribution of public investment seems to be related to the electoral geography. The electoral preferences of prefectures, even the area of origin of certain members of each government, seem to comprise explanatory variables for the regional distribution of public investment. Obviously this conclusion requires more carefully collected evidence, and cannot be generalized, but certainly, contribute to the better understanding of the regional distribution of public investments in Greece.

The End

Summary statistics

Index Public Investment (PI) per capita

Prefectures (NUTS ΙII) 1976-1981

1982-1985

1986-1989

1982-1989

1990-1993

1994-1996

1997-2000

1994-2000

1976-2001

Average 16.44 17.07 15.76 32.84 16.85 11.92 18.96 30.84 89.27

Standard Deviation 7.06 7.57 6.72 13.75 8.42 4.62 7.44 11.27 18.84

Max/Min Ratio 5.30 5.59 5.13 5.09 7.93 4.76 4.93 4.18 1.97

Coefficient of Variance 0.43 0.44 0.43 0.42 0.50 0.39 0.39 0.37 0.21

Weighted Coefficient of Variance

0.35 0.38 0.38 0.37 0.47 0.36 0.30 0.29 0.22

Box plot

Regional Distribution of Public Investment per period

Regional Distribution of Public Investment per period

Return Summary Statistics

Financial Recourses of Greek Public Investment Budget

Return


0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

1960 1970 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Own resources

EU Structural Funds

Borrowing total


0

1000

2000

3000

4000

5000

6000

7000

8000

1960 1970 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Own resources

EU Structural Funds

Borrowing total

TOTALat constant prices 1999in million euros

the political economy of the regional allocation of public investment in greece 1 976-2004

Documents

public budget

public goods

pasok socialist party

pasok socialist party

gdppublic investment

greek annual budget

ordinary budget expenditure

spatial pattern of revenue