The Effects of Results-Oriented Budgeting on Government Spending Patterns in Thailand

Abstract

This article investigates the immediate and permanent effects of the most recent budget reform, a results-oriented budget, on a government’s spending levels across functions. Under the new budget format, the resource allocation process is influenced by departments’ program planning and performance data, including objectives, strategies, outputs, and outcomes. The theoretical literature is unclear on the role of this new reform in pinpointing whether it is a rational budget in which resource allocation is tied to policy priorities and whether there has been a benefit in enhancing the government’s planning capacity. Using time-series data from 1965 to 2005 on Thai government spending, the empirical results indicate that the new budget reform enhances government planning capacity in two service functions, national defense and general administration, by shifting resources permanently between functions and cutting spending immediately on the function that is irrelevant to the country’s master plans.