Non repeating students * R&D / Social deterioration
(7)
3.2 The use of public expenditure indicators in PPH
We consider also an alternative scenario in which the four commodities of figure 4 are
represented by the level of public expenditure31. In this setting the indicators of PPH become the
amount of public expenditure32 relating to each specific functional sector (i.e. health,
environmental quality, safety, and occupation). This alternative could prove very useful for
policy-makers, because it allows to run the simulations by varying only public expenditure, a
very common policy tool. Moreover, comparing the results with those given by socio-economic
indicators, it is possible to point out the degree of conversion of public expenditure into well-
being.
In detail we use the following regional figures33:
• health expenses (COFOG 07) for health level;
• environmental protection expenses (COFOG 05) for environmental quality;
• public order and safety expenses (COFOG 03) for safety;
• economic affairs expenditures (COFOG 04) for occupation34.
Public expenditure indicators are determinant of well-being, according to the point of section
2.3.
4 Running the simulations
To test the CFM we ran different simulations for three regions: Lombardy, Emilia Romagna
and Campania. This choice is suggested by per capita GDP and quality of life rankings (based
on Grasso, 2002: table 535, p. 286) of the Italian regions. In doing so we compare a rich and
important region (Lombardy), whose ranking of quality of life is noticeably lower than the one
in terms of GDP, with another high-income region with the highest quality of life (Emilia
Romagna), and with one of the lower-income regions, characterized by the lowest ranking of
quality of life (Campania). The results of the simulations are given for the functioning Physical
and Psychological Health - both when the commodities are the socio-economic indicators of
section 3.1, and when these are the indicators of public expenditure of section 3.2 - and for the
whole CFM36. We sketch for demonstrative purposes, two simulations - out of the infinite
feasible - on a three-year (twelve quarters) time horizon: one in which all the commodities have
a steady positive growth rate of 2.4% per year (0.6% per quarter), and one with a steady
negative growth rate of 2.4% per year.
31 In this provisional model we don’t change the conversion factors according to the changed commodities. On the
other hand we change the weight attached to each indicator according to the new inverse function of frequency of
the indicators of public expenditure.
32 We follow the functional classification of expense used by Istat (see Istat, I conti della pubblica amministrazione,
table 17), which is derived from UN COFOG (United Nations Classification of Expenditure According to Purpose
- New York, 2000).
33 Drawn from Annuario Statistico Regionale Lombardia, table 50.08.02.01.
34 Employment is produced directly by both the private and public sectors. Moreover some public expenditure can
favour the production of employment by the private sector. For this reason we consider the whole Division 04 -
Economic Affairs of COFOG, which is composed by 04.1 general economic commercial and labour affairs, 04.2
agricultural, forestry, fishing and hunting. 04.3 fuel and energy, 04.4 mining, manufacturing and construction,
04.5 transport, 04.6 communication, 04.7 other industries, 04.8 R&D, 04.9 economic affairs n.e.c.
35 According to the findings of this work, Lombardy is third (out of twenty regions) in term of per capita GDP and
tenth in term of quality of life, while Emilia Romagna is respectively second and first, and Campania nineteenth
and twentieth.
36 The simulations regarding Education and Training, and Social Interactions are summarized in annex III and IV.
They are necessary to simulate the whole CFM, but the two functionings are considered less comprehensively that
the functioning which represents our main focus, i.e. Physical and Psychological Health.
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