Macroeconomic Instabilities and Cost-Recovery Potentials of Public Sector Organisations

Abstract

The 2008 financial crisis aroused 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. Using LME models on data from the World Bank website and from six Land Administration Organisations (LAOs), it is established that a global financial crisis that is associated with declining GDP and higher inflation rate can insignificantly reduce the level of cost recovery for LAOs while persistent decline in GDP growth rate significantly eliminate 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.