Expenditures, Services, and Public Management

This paper examines the relationship between public expenditure and public services and the role of managers in altering the spending-service relationship. The empirical literature examining the hypothesis that a strong, positive correlation exists between spending levels and the volume and/or quality of services suggests that the strength of the correlation varies markedly from service to service. Other independent variables include the labor intensity of the service, organizational slack, and consumer behavior. That services reflect multiple determinants has implications for their management. The author offers an optimizing model or pure theory which expands the domain of public management beyond the traditional focus on altering public or "producer" behavior in the allocation and utilization of resources to include altering private or "consumer" behavior through marketing, regulation, and economic incentives.