The Political Economy
of the Regional Allocation
of Public Investment in Greece
1976-2004
Dr Yiannis Psycharis
Assistant Professor
Department of Planning and Regional
Development, University of Thessaly,
Greece
Aim of the paper
The paper aims to examine the spatiotemporal development of
the Greek Public Investment Budget over the period 1976-2001.
The key issues addressed are:

The pattern of regional allocation of Public Investment in Greece

The temporal evolution of regional allocation of Public Investment
in Greece

The determinants of regional allocation of Public Investment in
Greece
The Major Determinants




Economic
Social
Political
Geographical
The geography of public finance

Public finance is involved with the three essential questions:





first, how is revenue raised,
second, how is public expenditure allocated to finance public goods
and services, and
third, what is the balance between revenue and expenditure.
The geographical analysis of public finance places the emphasis
on the spatial pattern of revenue-raising, the spatial pattern of
public expenditure, and the spatial balance between revenue and
expenditure.
In Britain, the debate over devolution has thrown up specifically
spatial questions about the present distribution of public
expenditure in order to determine who gets what, where.
Literature Review

Initial Contributions

Buchanan (1949), (1950), (1952)

Musgrave (1959), (1983)

Scott (1952), (1964)

Samuelson (1954)

Tiebout (1956)

Oates (1972), (1991)

Nordhaus (1975), (1989)

Bennett (1980)

Contemporary Contributions








Heald (1980), (1994), (1999)
Short (1978), (1981)
MacKay (1993), (1996), (2001)
Gramlich (1977)
Ladd (1990)
Anderson and Tollison (1991)
Wallis (1996)
Oates (1998), Collective Volume
Statistical Data and Sources



The Greek Public Investment Budget is part and parcel of
the Greek Annual Budget. It forms a very important
constituent of the Public Budget and of course is approved
by the Parliament.
It brings the most updated time-series of primary data for
the period referred above. The data have been deflated at
constant 1970 prices.
They are broken down at the prefectural level.
The year 2000
Ordinary Budget expenditure:
Public Investment Budget:
32.0% of GDP
4.7% of GDP
GREECE’S TIERS OF LOCAL GOVERNMENT
AND DECENTRALIZED STRUCTURES
Perifereia
3rd tier of decentralization (regional level)
13 Perifereies – Regions



Non-existent till 1986
Legislated for in 1986, but not fully functional till 1997
Since 1997 fully functional with a centrally-appointed General
Secretary (Periferiarchis) and co-opted members participating
in the Regional Council
Nomos

Led by a single government-appointed Prefect (Nomarchis) till
1982
Increased participation with co-opted members in the
Prefectural Council established in 1982. Prefect remains
centrally appointed
Fully elected tier of self-government since 1994.
2hd tier of self-government (prefectural level)
51 Nomoi
which are grouped into
50 Nomarchiakes Self-government organizations.
Demos
1st tier of self-government (local level)
1.033 Demoi – Municipalities




Fully elected throughout the period studied
Underwent drastic amalgamation in 1999 in a process of
municipalisation (5825 previously existing municipalities and
communes (438 and 5387 respectively) were reduced into
1033 municipalities and communes (900 and 133 respectively)
The choice of Prefectures as the base Unit for our Analysis


51 Prefectures (NUTS III level)
Prefecture is a key feature of the Greek political,
administrative and planning structure and also the
base unit for constituencies
Map of Greece
Periodising of the Post-dictatorial Greek Governments
•
1976-1981 New Democracy Party - Liberal Party
•
1982-1989 PASOK - Socialist Party
•
1982-1985
PASOK- Socialist Party
•
1986-1989
PASOK- Socialist Party
•
1990-1993 New Democracy Party - Liberal Party
•
1994-2000 PASOK - Socialist Party
•
1994-1996
PASOK- Socialist Party
•
1997-2000
PASOK- Socialist Party
Step towards to the European Integration
•
1981
Entry to European Economic Community
•
1985-1988 Mediterranean Integrated Programs
•
1989-1993 First Community Support Framework
•
1994-1999 Second Community Support Framework
•
2000-2006 Third Community Support Framework
•
2001
Entry to the European Monetary Union (EMU)
Financial Recourses of Greek Public Investment Budget
lines
Public Investment Budget
1980-2003
at constant prices 1999
in million euros
Borrowing transferd to Public Enterprices
Borrowing
EU Structural Funds
Own resources
TOTAL
8000
Public Investment Budget
1980-2003
Borrowing transferd to Public Enterprices
Borrowing
EU Structural Funds
Own resources
100%
7000
80%
6000
5000
60%
4000
3000
40%
2000
20%
1000
0
1960 1970 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
0%
1960 1970 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
Return
1976-1981: The establishment of the Democracy (New Democracy Party in Power)
Funds
Prefectures
(Nuts III)
Greece =100
500
PI per capita 1976-81
400
300
200
100
0
0
50
100
150
200
250
GDP per capita 1976
Unit
Public Investment (PI)
Prefectures (NUTS ΙII)
Gross Domestic Product (GDP)
Share (%)
per capita
Share (%)
per capita
in percentage of average
in percentage of average
Greece
Greece
Attiki
1976-1981
1976-1981
Attiki
1976
1976
Greece
100.0
91.2
Evros
243.5
222.0
1
3.7
4
74.1
62.8 37
1.1 20
Evrytania
217.9
198.7
2
0.6 38
54.4
46.1 51
0.1 51
Serres
197.7
180.3
3
4.0
3
88.3
74.9 21
1.8
Ileia
182.4
166.4
4
3.0
5
89.8
76.1 19
1.5 14
100,0
100.0
84.8
100.0
9
Ioannina
158.7
144.8
5
2.4
7
71.7
Attiki
109.6
100.0 17
37.9
1
118.0
100.0
2
40.8
Thessaloniki
72.5
66.1 35
6.5
86.4
7
9.1
55.4
50.6 47
2
0.8 30
101.9
Imathia
106.0
89.9
6
2
1.5 16
Karditsa
55.2
50.4 48
0.7 33
86.1
73.0 22
1.1 21
Kozani
53.7
49.0 49
0.8 28
101.2
85.8
1.5 13
Larisa
50.8
46.3 50
1.3 15
91.5
77.6 17
2.4
Trikala
45.9
41.9 51
0.6 36
72.1
61.1 41
1.0 25
60.7 42
8
1.1 22
1
4
1982-1989: The Socialist Era (Socialist Party in Power)
Funds
Prefectures
(Nuts III)
Greece =100
500
PI per capita 1982-89
400
300
200
100
0
0
50
100
150
200
250
GDP per capita 1982
Unit
Public Investment (PI)
Per capita
Prefectures (NUTS III)
Gross Domestic Product (GDP)
Share (%)
Per capita
Share (%)
in percentage of average of
in percentage of average of
Greece
Greece
Attiki
1982-1989
1982-1989
Attiki
1982
1982
Greece
100.0
122.2
100.0
94.5
Evrytania
333.3
407.1
1
0.8 42
74.3
70.3
44
0.2 50
Kefallinia
254.7
311.1
2
0.8 40
94.9
89.7
24
0.3 46
Voiotia
229.3
280.1
3
2.9
4
185.2
175.1
1
Rethymni
209.2
255.5
4
1.4 18
102.1
96.5
17
0.7 38
Evros
203.2
248.2
5
2.8
5
80.1
75.8
40
1.2 21
Attiki
81.9
100.0 43
28.4
1
105.8
100.0
12
36.6
1
Thessaloniki
69.2
84.6 47
6.3
2
96.6
91.3
20
8.7
2
Fthiotida
67.6
82.6 48
1.1 27
99.8
94.4
18
1.7 12
Imathia
67.1
81.9 49
0.9 33
108.8
102.9
8
1.5 17
Ileia
66.0
80.6 50
1.2 23
90.5
85.6
28
1.5 16
Korinthia
65.5
80.0 51
0.9 37
125.0
118.2
3
1.6 14
100.0
100.0
2.3
7
1982-1985 & 1986-1989: The two Socialist Governments of the ’80s
Prefectures
(Nuts III)
Greece =100
500
Prefectures
(Nuts III)
Greece =100
500
400
400
PI per capita 1986-89
PI per capita 1982-85
Funds
300
200
100
300
200
100
0
0
0
50
100
150
GDP per capita 1982
200
250
0
50
100
150
GDP per capita 1986
200
250
Changes in the spatial pattern between 1976-1981 and 1982-1989
Unit
Prefectures (NUTS III)
Greece
Rethymni
Karditsa
Arta
Change in ranking
for Public Investment per capita
1976-1981
1982-1989
16.03
25.41
13.94
30
53.16
4
8.85
48
30.38
24
9.99
42
30.37
25
Drama
11.95
34
34.03
19
Kastoria
11.59
36
32.47
23
Irakleio
9.88
43
26.56
31
Evvoia
10.87
40
27.69
28
Fokida
16.60
23
41.06
12
Aitoloakarnania
15.48
24
24.78
35
Argolida
17.13
19
26.99
30
Thessaloniki
11.62
35
17.59
47
Korinthia
11.05
38
16.64
51
Pella
23.38
8
30.26
26
Attiki
17.57
17
20.81
43
Serres
31.69
3
18.80
46
Ileia
29.24
4
16.76
50
1990-1993: The return of New Democracy
Funds
Prefectures
(Nuts III)
Greece =100
500
PI per capita 1990-93
400
300
200
100
0
0
50
100
150
200
250
GDP per capita 1990
Unit
Public Investment (PI)
Per capita
Prefectures (NUTS III)
Gross Domestic Product (GDP)
Share (%)
Per capita
Share (%)
In percentage of average
In percentage of average
Greece
Greece
Attiki
1990-1993
1990-1993
Attiki
1990
1990
Greece
100.0
144.9
Evrytania
423.2
613.0
1
1.0 35
79.2
74.2 36
0.2 50
Fokida
276.3
400.2
2
1.2 28
98.5
92.2 17
0.4 42
Grevena
270.8
392.3
3
1.0 38
71.6
67.1 44
0.2 49
Samos
257.1
372.4
4
1.1 32
81.0
75.8 33
0.3 44
Xanthi
227.3
329.2
5
2.0 12
77.6
72.7
0.7 35
Attiki
69.0
100.0 47
1
106.8
100.0 10
Imathia
66.0
95.6 48
0.9 42
106.4
99.6 11
1.4 16
Thessaloniki
65.0
94.1 49
6.0
2
103.4
96.8 13
9.6
Ileia
58.6
84.9 50
1.0 34
75.1
70.3 40
1.3 17
Korinthia
53.4
77.3 51
0.7 46
137.8
100.0
23.7
100.0
93.6
129.0
100.0
38
2
37.1
1
2
1.9 11
Changes in the spatial pattern between 1982-1989 and 1990-1993
Unit
Prefectures (NUTS III)
Greece
Change in ranking
for Public Investment per capita
1982-1989
1990-1993
25.41
11.73
Xanthi
24.68
36
26.65
5
Kerkyra
20.95
42
17.08
22
Fthiotida
17.19
48
11.32
34
Aitoloakarnania
24.78
35
16.16
24
Evros
26.56
31
9.82
42
Kefallinia
64.72
2
22.00
13
Evvoia
51.63
5
20.40
16
Messinia
42.10
11
16.76
23
Dodekanisos
38.07
15
14.88
27
Lasithi
38.95
14
14.88
26
Rethymni
53.16
4
19.46
18
1994-2000: The return of the Socialists
Funds
Prefectures
(Nuts III)
Greece =100
500
PI per capita 1994-00
400
300
200
100
0
0
50
100
150
200
250
GDP per capita 1994
Unit
Public Investment (PI)
per capita
Gross Domestic Product (GDP)
Share (%)
per capita
in percentage of average of
Greece
Prefectures (NUTS III)
Attiki
Greece
1994-2000
Share (%)
in percentage of average
of
1994-2000
Attiki
1994
1994
Greece
100.0
101.6
Samos
203.3
206.5
1
0.7 37
82.6
73.8 31
0.3 44
Thesprotia
196.0
199.2
2
0.9 31
58.8
52.5 49
0.3 47
Preveza
185.6
188.6
3
1.1 25
70.7
63.2 39
0.4 40
Lefkada
182.0
184.9
4
0.4 51
68.8
61.4 41
0.1 51
Evros
177.2
180.0
5
2.2
6
95.9
85.6 20
Attiki
98.4
100.0 31
32.3
1
112.0
100.0
7
37.4
1
Thessaloniki
82.7
84.0 38
7.7
2
107.1
95.6
8
9.8
2
Evvoia
59.8
60.8 47
1.3 19
95.6
85.4 21
2.0
8
Larisa
56.8
57.7 48
1.5 15
91.4
81.6 23
2.4
5
Pella
55.7
56.6 49
0.8 35
96.4
86.1 17
1.3 20
Korinthia
51.9
52.8 50
0.8 32
112.5
Imathia
48.7
49.4 51
0.7 40
101.8
100.0
100.0
89.3
100.5
100.0
1.2 22
5
1.8 11
90.9 14
1.4 15
1994-1996 & 1997-2000: The two Socialist Governments of the ’90s
Funds
1994-2000
Prefectures
(Nuts III)
Greece =100
500
Prefectures
(Nuts III)
Greece =100
500
400
PI per capita 1997-00
PI per capita 1994-96
400
300
200
300
200
100
100
0
0
0
50
100
150
GDP per capita 1994
200
250
0
50
100
150
GDP per capita 1997
200
250
Changes in the spatial pattern between 1990-1993 and 1994-2000
Unit
Prefectures (NUTS III)
Greece
Change in ranking
for Public Investment per capita
1990-1993
1994-2000
11.73
27.08
Achaia
10.54
37
39.90
12
Fthiotida
11.32
34
39.77
13
Rodopi
15.47
25
42.86
7
Ileia
6.87
50
25.32
33
Attiki
8.10
47
26.66
31
Pieria
10.10
41
27.77
29
Chalkidiki
13.39
29
37.54
17
Zakynthos
18.31
20
42.37
9
7.62
49
22.39
38
Evros
20.40
16
48.00
5
Lakonia
11.57
33
16.93
45
Pella
10.55
36
15.08
49
Evrytania
49.63
1
39.46
15
Xanthi
26.65
5
34.64
20
Karditsa
18.13
21
22.89
36
Messinia
14.88
27
17.78
43
Ioannina
25.01
8
30.59
25
Fokida
32.40
2
30.47
26
Voiotia
24.84
9
18.02
42
Thessaloniki
The accumulation of Public Investment in Greece 1976-2001
Per capita
Summary statistics
Index
Public Investment (PI)
in million euro at constant 1970 prices
Prefectures (NUTS ΙII)
19761981
19821985
19861989
19821989
19901993
19941996
19972000
19942000
19762001
Average
3.06
2.52
2.43
4.95
2.36
1.97
3.61
Standard Deviation
8.20
4.83
5.03
9.84
3.91
3.66
9.15 12.77 36.49
Max/Min Ratio
Coefficient of Variance
Weighted Coefficient of
Variance
5.58 16.79
132.95 67.06 77.94 72.20 60.41 65.63 100.53 87.35 83.14
2.68
1.91
2.07
1.99
1.66
1.86
2.53
2.29
2.17
10.82
7.62
8.28
7.93
6.54
7.11 10.15
9.13
8.70
Overview




Observing the transitions in the spatial distribution of public
investments in Greece during the 1976-2001 period, a circle
appears to have been completed.
Beginning from an intensely centralizing pattern for the spatial
distribution of public investment, during the 1970s, which gave
priority to the country’s urban development poles and selectively to
certain agricultural or moderately urbanized areas, we passed, in the
1980s, to an intensely decentralizing and redistributive model with
certain “clear” exceptions.
This pattern was extended into the first years of the 1990s.
From the around the mid-point of the 1990s to 2001, a change
came about in the regional distribution pattern for the country’s
public investment, characterized by the spatial concentration of
public investments on the dynamic development poles and axes of
the country. This pattern continued to apply during the first years of
the new century. Attiki, Thessaloniki and Achaia and the links
between them have played a catalytic role in the evolution of this
pattern.
Concluding remarks
Summarizing four tentative conclusions can be drawn.

First, the level of underdevelopment of prefectures does not appear
to have constantly and systematically constitute the principal criterion
for the regional distribution of public investment in Greece during the
1976-2001 study period.
Concluding remarks

Second, the concentration of population and economic activity in
the two large urban centres of the country acted catalytically on
the regional distribution model for public investment in the
country's prefectures. 50% of the country's population resides in
Attiki or Thessaloniki, where 50% of the GDP is produced.
Although per capita public investments in these two prefectures
have fluctuated, in Attiki around average, and in Thessloniki
below it, the absolute values have consistently comprised more
than 30% and usually up to 45% of total public investment.
Concluding remarks

Third, the policy concerning the regional distribution of public
investment that was followed throughout the study period does not
seem to have been dictated by a higher-level strategic regional
development plan. For this to have been the case the government
should have been systematically monitoring and recording the public
capital balance by department, noting potential gaps, the omissions,
the inequalities and the needs and to distribute resources accordingly.
Sadly, this was not the case. In contrast to this, the regional
distribution of public investments seems to be dictated more by
faltering, ad hoc interventions based on opportunistic and some times
indeterminate criteria, rather than by coordinated interventions
dictated by some well researched plan of recorded needs.
Concluding remarks

Last, but not least, the regional distribution of public investment
seems to be related to the electoral geography. The electoral
preferences of prefectures, even the area of origin of certain
members of each government, seem to comprise explanatory
variables for the regional distribution of public investment. Obviously
this conclusion requires more carefully collected evidence, and cannot
be generalized, but certainly, contribute to the better understanding
of the regional distribution of public investments in Greece.
The End
Summary statistics
Index
Box
plot
Public Investment (PI) per capita
19761981
19821985
19861989
19821989
19901993
19941996
19972000
19942000
16.44
17.07
15.76
32.84
16.85
11.92
18.96
30.84
89.27
Standard Deviation
7.06
7.57
6.72
13.75
8.42
4.62
7.44
11.27
18.84
Max/Min Ratio
5.30
5.59
5.13
5.09
7.93
4.76
4.93
4.18
1.97
Coefficient of Variance
0.43
0.44
0.43
0.42
0.50
0.39
0.39
0.37
0.21
Weighted Coefficient of
Variance
0.35
0.38
0.38
0.37
0.47
0.36
0.30
0.29
0.22
Prefectures (NUTS ΙII)
Average
19762001
Regional Distribution of Public Investment per period
Regional Distribution of Public Investment per period
Return
Summary
Statistics
Financial Recourses of Greek Public Investment Budget
Public Investment Budget
1980-2003
at constant prices 1999
in million euros
Own resources
EU Structural Funds
Public Investment Budget
1980-2003
Borrowing total
TOTAL
8000
Own resources
EU Structural Funds
Borrowing total
100.0
7000
90.0
6000
80.0
70.0
5000
60.0
4000
3000
2000
50.0
40.0
30.0
20.0
1000
0
1960 1970 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
10.0
0.0
1960 1970 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
Return