arXiv 5 Mar 2026 · General Economics
arXiv:2603.05563 · PDF · DOI · OpenAlex · Extracted main text
This paper develops a nonlinear theoretical framework to analyze the dynamics of public expenditure reallocation in Uruguay. Motivated by recent debates on fiscal reform and expenditure efficiency, the paper models fiscal adjustment as a dynamic process in which expenditure categories exhibit heterogeneous institutional rigidity and convex adjustment costs. Using the national budget for the 2026-2030 fiscal period as an institutional reference, the paper presents a calibrated illustration of the theoretical framework that captures key features of the structure of public spending, including transfers, the public wage bill, operating expenditures, and public investment. The calibration translates institutional characteristics of the budget into quantitative transition dynamics rather than estimating structural parameters econometrically. The framework allows the evaluation of short-, medium-, and long-run fiscal implications of alternative reform strategies, including administrative restructuring, pension reform, and the gradual reallocation of resources toward human capital and productivity-enhancing investment. In contrast to descriptive expenditure reviews based on static budget comparisons, the model explicitly incorporates nonlinear transition dynamics and institutional frictions. Simulations show that structural expenditure reforms generate significant transitional fiscal costs arising from overlapping institutional systems, labor adjustment frictions, and pension transition liabilities. As a result, fiscal reform produces a J-shaped expenditure trajectory in which total spending initially increases before gradually converging toward a more efficient long-run allocation. These findings highlight the importance of accounting for adjustment costs and transition dynamics when evaluating the feasibility and timing of structural fiscal reforms.
appendix boundary found by appendix_command · 84% of the source is main text. Read the extracted text to check this.
The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Alesina, Alberto and Drazen, Allan (1991) Why Are Stabilizations Delayed? | 1.000 | 5 | 3 | 100% |
| 2 | Alesina, Alberto and Favero, Carlo and Giavazzi, Francesco (2019) Effects of Austerity: Expenditure- and Tax-Based Approaches | 0.928 | 4 | 3 | 100% |
| 3 | Persson, Torsten and Tabellini, Guido (2000) Political Economics: Explaining Economic Policy | 0.928 | 4 | 3 | 100% |
| 4 | Tanzi, Vito and Schuknecht, Ludger (2000) Public Spending in the 20th Century: A Global Perspective | 0.811 | 4 | 2 | 100% |
| 5 | Barro, Robert J (1990) Government Spending in a Simple Model of Endogenous Growth | 0.737 | 3 | 2 | 100% |
| 6 | Drazen, Allan (2000) Political Economy in Macroeconomics | 0.737 | 3 | 2 | 100% |
| 7 | Kneller, Richard and Bleaney, Michael and Gemmell, Norman (1999) Fiscal Policy and Growth: Evidence from OECD Countries | 0.737 | 3 | 2 | 100% |
| 8 | North, Douglass C (1990) Institutions, Institutional Change and Economic Performance | 0.737 | 3 | 2 | 100% |
| 9 | OECD (2015) Government at a Glance 2015 | 0.737 | 3 | 2 | 100% |
| 10 | Alesina, Alberto and Ardagna, Silvia (2010) Large Changes in Fiscal Policy: Taxes Versus Spending | 0.644 | 2 | 2 | 100% |
Showing the top 10 of 29 scored citations.