# Real spending ratio

The real expenditure quota is an economic indicator which shows the share of government consumption and government gross investment in the gross domestic product .

## General

The real expenditure ratio shows the real share of the public sector in the output value of goods and services in an economy . It shows what share the state owns in economic production or what share is not distributed via the market . It is based on real expenditure, the sum of government material expenditure (including capital expenditure ) and personnel expenditure . The real expenditure ratio is a measure of the state's consumption of resources; it can be calculated both without inflation ( nominal real expenditure ratio ) and with inflation ( real real expenditure ratio).

## detection

The real expenditure quota differs from the government quota in that the latter also includes interest and repayment expenses for government debts :

    Staatsquote
- Zinsaufwand für Staatsschulden
- Tilgung für Staatsschulden
= Realausgabenquote


State consumption includes state consumption expenditure such as personnel costs for public administration and gross investments such as infrastructure costs . State consumption is made up of expenditure on public goods and services ( public security , national defense ).

Then the real expenditure quota results as follows:

${\ displaystyle {\ text {Real expenditure ratio}} = {\ frac {{\ text {Personnel expenditure}} + {\ text {Material expenditure}}} {\ text {Gross domestic product (GDP)}}}}$

It is the part of the gross domestic product that the state provides to the population. However, it is only achieved through deadweight loss , so a zero sum can arise.

## economic aspects

The real expenditure quota is about determining the extent to which the state controls the added value of an economy. In addition to public goods / services, the state also provides finance where there is market failure , for example in research and science , culture and transport . The real expenditure quota also makes it possible to identify structural economic changes through a comparison with state transfer payments (e.g. social assistance , educational offers ). For this purpose, the real expenditure quota is compared with the transfer performance quota as a share of the state transfer payments in the gross domestic product. The real expenditure ratio shows the extent to which the state actually uses economic resources better than the state ratio .

statistics

Share of real expenditures in gross national income at market prices in Germany:

year Real spending ratio
in%
Transfer performance rate
in%
1950 16.4 14.8
1960 16.6 16.3
1970 16.0 19.3
1980 16.5 26.6
1990 13.7 26.2
2000 13.9 34.2
2010 19.9 33.5

The share of transfer payments in Germany has increased significantly more than the real expenditure ratio. The latter has tended to stagnate since 1950, while the transfer benefit rate grew by 18.7 percentage points. Since transfer expenditures merely represent a transfer of purchasing power to the benefit of the private sector, the government quota is not a suitable measure of the real consumption of resources by the public sector. In 2015 the German real expenditure ratio was 20.3% of the gross domestic product.

## Individual evidence

1. ^ Giacomo Corneo, Public Finances: Spending Policy , 2018, p. 15
2. ^ Gerold Ambrosius, State and Economy in the 20th Century , 1990, p. 60
3. ^ Siegfried G. Schoppe / Dieter Porschen, On the Problem of Measuring State Economic Activities , Vol. 57, Edition 7, 1977, p. 369
4. Konrad Littmann, Definition and Development of the State Quota , 1976, p. 72
5. Werner Abelshauser / Dietmar Petzina, Regulatory Policy Setting the Course after the Second World War , 1991, p. 33
6. ^ Charles B. Blankart, Public Finances in Democracy , 2012, p. 160