Theoretical Aspects of Optimizing the Allocation of Public Financial Resources at Local Level
Timisoara Journal of Economics,
public expenditure, local authorities, Armey, optimum, welfare
The allocation of financial resources at local, but also at central level, is an issue especially since in times of crisis, finding the optimum way to spend public funds concerns all authorities. This paper aims to identify the ways in which, by leaving from the division of powers based on the allocation of resources and tools available, the local authorities can identify an optimal level of public expenditure so as to achieve a maximum level of using them. Also, the paper seeks to identify the impact that the local public expenditure can have on the development of local gross domestic product as an expression of social welfare. Starting from the scientific acquisitions of Dick and Richard Armey, the "Armey Curve" was revised, thus identifying two components of the public sector: a central one and a local one. Following that, a chart relationship was established between the allocation of local public funds and the social welfare expressed by the local gross domestic product. By analyzing the shape of this chart, two econometric models have been developed: one regarding the impact of local resource allocation, and another one setting the optimal level of allocation of local public funds.