Macroeconomic Instabilities and Cost-Recovery Potentials of Public Sector Organisations

Samwel Alananga Sanga (Department of Land Management and Valuation, School of Earth Sciences, Real Estate, Business and Informatics, Ardhi University, Tanzania)

Abstract


The 2008 financial crisis raised concerns over the performance of public sector organisations operating under different cost recovery regimes. These concerns were linked to potential failure in attaining cost recovery targets as a result of declining revenues during economic downturn. This study utilised the Linear Mixed Effect (LME) models to analyse the data from the World Bank Indicator website and from six national Land Administration Organisations (LAOs), two of which being under “No cost recovery” (NCR) and the remaining being in “Full Cost Recovery” (FCR). Cost recovery indicators were computed from financial statement of national LAOs of these countries. The findings establish that a global financial crisis that is associated with declining GDP and a higher inflation rate can insignificantly reduce the level of cost recovery for LAOs while persistent decline in GDP growth rate significantly eliminates potentials for cost recovery. However prospects for recovery can be traced within the cost-revenue microstructures of LAOs themselves. With a significantly negative relationship between spending in information and technology as a ratio of GDP to the degree of cost recovery, LAOs need only to eliminate rigidities in their cost-revenue structure which tie them to macro-instabilities of the real estate market. Such flexibility can be attained through elastic cross-substitution in the LAO’s gross cost-revenues schedules for registration tasks in favour of information delivery tasks.


Keywords


Cost recovery; LAOs; Financial crisis; GDP; Land information products; Registration cost; LME models; Inflation rate; Public financing options

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DOI: https://doi.org/10.30564/jesr.v4i2.1359

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