Public Finance Management

Andrei Petroia
Ph.D.
Associate professor

petroia5@hotmail.com

Subject 1. PUBLIC SECTOR

Public Finance Management

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The public goods are the those benefits which are not:

competing / rival (in other words, are characterized by

joint consumption or socialization);

exclusive.

Joint consumption belongs to the idea, according to which the benefit from
the use of given good can be obtained by more than 1 person in the same
time (formula 1+1+1).

For example:
two employees can use the light of the bulb, which was shone at their
office at the same time;
consumption of light by one employee practically does not reduce the
quantity of light remaining to another.
seeing a match at the stadium tribune or a performance at the theater is
characterized by joint consumption.

However, 2 persons cannot eat the same hamburger at the same time.

Non-exclusivity exists when the person uses the good regardless whether
he/she carried out a payment for it or not (executed or not an action /
something for its receiving).

For example:
if the neighbor sprinkled a liquid spray from mosquitoes, it is very
difficult to you to not prevent the participation in use of "fruits" of the
neighbors action (i.e. you also will be a little protected from mosquitoes).
in case of the system of national defense is established, but anyway
(whether you paid taxes or not at present) all citizens will use the results
of this system.

Scheme. Definition of the public good

Scheme. Structure of public (state) sector

State an element, which includes legislative and executive bodies at all levels of
the power:
at nation-wide (republican) level Parliament, President, central government;
at local level local councils, regional executive committees, primariya etc..
APA administrative public agencies, which include all the ministries, departments,
divisions, associations and other departments of republican or local subordination.
PIPCC public institutions of production and commercial character covering various
public institutions (for example in education kindergartens, schools, universities...;
in the health care sphere hospitals, policlinics... The production and commercial
character is appropriated to them almost symbolically, though it is quite justified, as
they make (produce) and realize (or, in other words, commercialize) various
services, as a rule.
P(S)E public (state) enterprises.

Criteria for defining public (state) enterprises:

sale of goods and services at the market: the state enterprises belong to the commercial
sphere, and "state" to the noncommercial sphere;
covering of expenditures at the expense of commercialization of products or services: the
purpose of the state enterprises is not the maximization of profit, but the non-admission of
the deficit. In this case, it is necessary to carry out a comparison of the state enterprise
with the private one: the maximization of financial profit always was a paramount
(primary) task of private enterprises in order to survive in the conditions of the rigid
competition. In case of the state enterprises, it should be mentioned that the financial
losses are admissible for them (losses linked to the additional expenditures from the
budget in the form of grants, subsidies, subventions etc.), which, in their turn, should be
covered" by social benefits for the state in other words, we speak about socio-economic
profit;
share of the capital which belongs to the state; in the legislation of the various states, this norm
is treated differently: the most part of shares, more than a half of all shares, 50 % + 1
share (as in case of Moldova), a controlling stake (majority packet) but it at all doesnt
mean 50 % or 51 % because according to the world experience it is well known when for
the possession of a controlling stake it is enough to have 40 % or 30 % of shares only).

Public sector

Sector of public
administration

Central
Government

Regional
administrative bodies

Local administrative
bodies

State corporations
(enterprises)

State financial
corporations

State non-financial
corporations

State monetary and credit corporations,

including Central Bank

State financial corporations, excluding

monetary and credit corporations

Scheme. Structure of public (state) sector (IMF version).

Groups of factors, which lead to the changes in para-public sector:

political factors;

historical factors;

social factors;

economic factors.