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on Public Economics |
| By: | John Duffy (University of Pittsburgh); Tatiana Kornienko (University of Stirling) |
| Abstract: | We explore whether natural human competitiveness can be exploited to stimulate charitable giving in a controlled laboratory experiment involving three different treatments of a sequential ``dictator game.'' Without disclosing the actual amounts given and kept, in each period players are publicly ranked -- by the amount they give away, by the amount they keep for themselves, or spuriously. Our results are generally supportive of the hypothesis that competitive urges can encourage or frustrate altruistic behavior, depending on the competitive frame. We find some support for an alternative hypothesis that relative concerns are due to information-gathering rather than competition. |
| Keywords: | Dictator game, repeated decisions, charitable giving, altruistic behavior, competitive altruism, status, relative standing, tournaments, motivation, information-based relative concerns |
| JEL: | C91 D64 |
| Date: | 2005–08–13 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpex:0508002&r=pbe |
| By: | Peter Dixon; James Giesecke; Maurreen Rimmer |
| Abstract: | Many studies, both of Australia and of comparable developed economies, have found that the economic benefits from investment in urban infrastructure are substantial. However the nature of this infrastructure is often such that it is under-provided by the private sector. In Australia, much of the responsibility for the provision of urban infrastructure rests with state and local government. However throughout the 1990’s many of Australia’s state governments embarked on a period of fiscal restraint, seeking to improve financial positions weakened by exposure to failed state government enterprises in the early 1990’s. Perhaps because of the deferred consequences of reducing spending on infrastructure, a large proportion of this fiscal adjustment appears to have been borne by spending on public infrastructure. Today, policy attention at the state government level is again focussing on public infrastructure. However in spite of the now robust fiscal positions of Australia’s state governments, there remains a reluctance on their part to finance public infrastructure through debt, and raising taxes is perceived as politically unpopular. Instead, governments are exploring alternative financing instruments, such as developer charges and public-private partnerships. This paper uses a dynamic multi-regional CGE model (MMRF) to evaluate the regional macro economic consequences of four alternative methods of financing an expansion in state government spending on public infrastructure. The four methods are developer charges, payroll tax, government debt, and residential rates. The paper confirms that the services provided by public infrastructure can have significant impacts on the regional macro economy. More importantly however, the paper demonstrates that the total gains from urban infrastructure are quite sensitive to the means chosen by government to finance infrastructure investment. In contrast to up-front financing methods (such as developer charges, payroll tax, and residential rates), the paper finds that the gains from urban infrastructure are greatest when the chosen financing method provides a closer match between the timing of the burden of financing the infrastructure and the timing of the benefits provided by the infrastructure. This can be achieved by instruments such as debt, public-private partnerships, and user charges. On this basis the paper finds that a greater reliance by regional government son debt financing might be warranted, and that the gains from infrastructure expenditure are least when that expenditure is financed by developer charges. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p116&r=pbe |
| By: | Michel Mignolet; Nathalie Eyckmans; Olivier Meunier |
| Abstract: | For decades, most industrialised countries have implemented some forms of fiscal and financial incentives to stimulate fixed capital formation. Tax cuts and capital grants are of great use in regional policy. Since these instruments mobilise huge amounts of public resources the issue of their efficiency is of particular interest for policymakers. The impact of taxation on investment income was traditionally apprehended through models measuring the effective tax rate on marginal investments. However recent literature, especially Devereux and Griffith (2002), showed the interest of resorting to an alternative tax measure – the effective average tax rate (EATR) - when firms face discrete investment choices that are expected to generate positive economic rent before tax. This effective average tax rate is defined by the difference between the net present value of the rent of the investment before and after taxes scaled by the net present value of the pre-tax income stream. In this sense, the effective average tax rate developed by Devereux and Griffith (2002) seems to be particularly relevant to shed a new light on the relative effectiveness of tax cuts and capital subsidy grants. In this paper we intend to compare the costs for public authorities to lower the corporate tax rate or to grant a capital subsidy. These public costs are directly affected by the variation of the after-tax revenue earned by the shareholder. The extent to which each policy must be implemented depends on the channel chosen by the government to stimulate investment. We pay attention to two of these channels: a reduction of the capital cost and a lowering of the EATR. Finally, in order to illustrate the relevance of our approach, we developed a numerical example for the Belgian case. JEL Classification: H25, H32 and R58 |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p541&r=pbe |
| By: | Michel Mignolet; Marie-Eve Mulquin; Frédérique Denil |
| Abstract: | Belgium is a federal state where regional fiscal competences have been increasing. In particular, the regions are now able to increase or to lower the personal income tax burden of their residents via positive and negative surcharges. Should the regions adopt the possibilities opened by the Law, would it influence interregional mobility? It is not possible to assert directly this question. However, indirect evidence of the impact of fiscal disparities on mobility can be found by analysing the mobility between municipalities. Indeed, for long, the real estate income tax and the local surcharges on the federal personal income tax have not been uniform on the Belgian territory. We tried to quantify whether those tax differences generated population moves from the more expensive municipalities to the less expensive ones. The attractiveness of the municipalities measured by means of their intra Belgium migration balance has been explained by local wealth, employment rate, quality of the local administration, proximity to the coast, three indexes constructed by a factor analysis based on a satisfaction survey, housing prices and local taxation. Our estimations showed that local tax level has no significant impact on the local migration balance. Is this observation transposable at the regional level? On one side, the answer to this question depends on the level of disparities in tax rates that such a practice would introduce. On the other side, if disparities in regional tax were to appear, interregional mobility would be slowed down by the impact of the interregional cultural differences. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p104&r=pbe |
| By: | Peter Friedrich; Anita Kaltschütz; Chang Woon Nam |
| Abstract: | The idea of fiscal decentralisation has become increasingly fashionable world-wide. In some developed countries the systems of intergovernmental finance have evolved gradually and each country has unique features. Transition countries on different continents have had differing reasons and motivations for such reforms. More recently, the acknowledgement of subsidiarity as the basic principle for the European Un-ion, the introduction of the West German federal system in the eastern part of the country, the revival of regionalism in European countries are distinctive examples of the decentralisation process in Europe. Following the equalisation objectives, one tends to argue that those municipalities with greater spending needs automatically require more financial support from central or upper-level government. Yet, the sum of grants to municipalities should basically be induced from the comparison of their expenditure needs with local fiscal capacity from their own resources such as local tax revenues and fees. Surely the expenditure behaviour of municipalities is also, to a great extent, influenced by their present fiscal capacity and by the size of local debts. Four European countries were chosen to survey the recent development of local finance: the UK, Germany, Poland and Switzerland. This paper firstly identifies and highlights the similarities and differences in municipal finance in an international context. Secondly it theoretically examines the possibility of enhancing fiscal autonomy of local governments through increasing revenues from fees. Keywords: fiscal decentralisation, local expenditures and taxes, shared taxes, intergovernmental transfers, municipal borrowings, Poland, the UK, Switzerland, Germany |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p288&r=pbe |
| By: | Keiko Hirota; Minato Kiyoyuki; Kii Masanobu |
| Abstract: | After the Kyoto Conference (COP3), the Japanese transport sector was required to reduce carbon dioxide (CO2) emissions by 16% by 2010. The Japanese government has decided to improve the fuel economy standard in 2010 by improving it by an average of 22.8%. However, Japanese consumers tend to prefer heavier passenger cars such as four-wheel drive or recreational vehicles. Because of the difficult target of COP3, environmental policy should involve not only automotive technologies but also non-technical measures. Since Japanese vehicle taxes are expensive compared to other OECD countries, we would like to introduce the “feebate”, a word composed from “fee” and “rebate”, as a “Green Tax” at the acquisition stage. The feebate system charges a fee for less fuel-efficient vehicles and refunds for vehicles more fuel efficient than the fuel efficiency standard. This system is a market based alternative by fuel efficiency standards so that it can be tax neutral. Acquisition tax does not affect to environmental sustainability. Since social marginal cost has increased more and more, it is not always realistic to impose all the costs at the motoring tax level. The feebate system could partially share the social marginal cost and might mitigate the rebound effect at the motoring stage. We use the data set from 1995-2001 on fuel efficiency by vehicle type and the fuel efficiency standards of 1995. The contribution of this paper will be to propose a combination of feebate rate and CO2 emission reduction by vehicle gross weight group. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p328&r=pbe |
| By: | Andrew Narwold |
| Abstract: | Previous studies have demonstrated the role that income tax incentives to landlords play in the determination of market rental rates. Landlords typically receive benefits from accelerated depreciation on real assets that are usually appreciating. The value of this tax benefit depends both on the depreciation schedule as well as the landlord's marginal tax rate. Changes in income tax law in the 1980's dramatically affected both of these factors. In 1980, the top federal marginal tax rate was 70%, and rental housing could be depreciated on a double-declining balance over 20 years. The Economic Recovery Tax Act of 1980 reduced the top marginal tax rate significantly. Changes were made in 1984 that altered the depreciation schedule so that rental property could be depreciated more rapidly. The Tax Reform Act of 1986 reformed the depreciation schedule so that rental property had to be depreciated over 27 years: a significant change for landlords. In addition, the top federal marginal tax rate was reduced to 33 percent. The main direction of the changes in the federal tax code in the 1980's was to decrease the tax advantages associated with rental property. Decreases in the top marginal tax rate reduced the value of tax write-offs, while increases in the length of time required for depreciation reduced the amount of depreciation taken each year. This paper examines the impact that these changes had on the rental housing market by looking at the changes in the relative cost of renting over the years 1986-1990. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p494&r=pbe |
| By: | Ossi Korkeamäki; Roope Uusitalo |
| Abstract: | The Finnish government implemented a temporary exemption from employer social insurance contributions for the employers that are located in high unemployment areas of the Northern Finland. The payroll tax exemption was designed as an experiment that aimed to evaluate employment effects of a regional payroll tax reduction. As a result of the experiment payroll taxes were reduced by 3 – 6 percentage points for three years beginning in January 2003. In this paper we evaluate the employment and wage effects of the regionally targeted payroll tax reduction. We compare the employment and wage changes in the target region to the employment and wage changes in a control region with a similar unemployment rate and industry structure than the target region. As finding an identical control region is not possible, we adopt a matching procedure by choosing, for each firm in the target region, a matched pair from the control region. We perform propensity score matching and use the estimated propensities as balancing scores to create a control group of firms that is similar to the treatment group in all the observable pre-treatment characteristics. We then estimate the effect of the payroll tax reduction using difference-in-differences estimators, essentially comparing employment and wage changes between the matched pairs after the start of the experiment. We report results from both nearest neighbour and kernel matched comparison groups. To enhance the transparency of the evaluation we have created the matched firm pairs from the plant database of Statistics Finland and designed and published the evaluation method before any data on employment or wage outcomes were available in December 2003. We will follow the employment change of the selected firms based on annual tax reports that will be available in March 2004. Detailed information on the wage responses will be added to the report in May 2004 based on the payroll data of the members of The Confederation of Finnish Industry and Employers and The Employers Federation of the Service Industries. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p350&r=pbe |
| By: | José Manuel Cruz |
| Abstract: | When estimating a specification combining different influences on local public choice, three public issues of different ideological attributes were compared for two periods of Portuguese local government intervention: the beginning and the ending of one electoral cycle. The most exciting results of the paper are the significance of ideology at local level and the decline of its importance in the ending of the electoral cycle. There is also some evidence on the political influence of interest groups, especially in low visible issues. On the general issue, majority is also influent and fiscal illusion is found. Some preliminary panel data results including two electoral cycles are analyzed. JEL CLASSIFICATION: H42; H73; R51 KEYWORDS: Median Voter; Interest Groups; Ideology; Local Government, Opportunistic Political Cycle |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p367&r=pbe |
| By: | Paulo Mourão |
| Abstract: | This work analyzes the evolution of real public expenditures of local and regional administrations (LRA), in Portugal, in the period after the Second World War. It also aims to estimate the elasticities associated to determinants, which explain the found growth. As most relevant results, it is focused that real public expenditures of LRA did not increase in a constant way – the most significant period of growth was between 1975 and 1990. A long-term relation was found among real public expenditures of LRA (as a proportion of real Gross National Product), the Number of Employees in Public Administration, the Number of Unemployed and Public Revenues. These results are consistent with modern versions of Wagner’s Laws, with the role of lobbying groups and with the bureaucracy being a source of discouragement referring to the decentralized public expenditures. JEL Codes: H50; H54; H72; C13 Keywords: Public Expenditures; Cointegration; Decentralization |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p93&r=pbe |
| By: | David Cantarero; Marta Pascual; Roberto Fernandez; María A. García-Valiñas |
| Abstract: | For the last years, Europe has been subject to fiscal austerity in order to satisfy the Maastrich criteria. In this way, Spanish municipalities have been affected by new regulations and local government structure has changed. This paper is focused on the main factors that explain local government debt. In particular, budgetary information of a group of Spanish municipalities is used (1990-2000). Econometric analysis of cross section and panel data are presented. Key words:Fiscal Federalism, Local Government, debt, decentralization. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p282&r=pbe |
| By: | Chang Woon Nam; Doina Maria Radulescu |
| Abstract: | Not only transition countries but also a large number of developing (and developed) countries have established free economic zones (FEZs) with the aim of attracting for-eign capital by providing tax incentives, creating employment opportunities and pro-moting exports as well as regional development. Major theoretical justifications for the establishment of such economic zones generally maintain that there are economies of scale in the development of land and in the provision of common services and utilities as well as external economies of agglomeration by having similar industries grouped together. One of the main characteristics of FEZs is the provision of generous tax in-vestment promotion schemes solely allowed in this enclave. In general such measures include: (a) profit tax exemption, (b) free or accelerated depreciation, (c) investment tax allowance, (d) subsidy for investment costs, etc. The incentive effects of various tax con-cessions on firms’ investment decisions can be compared on the basis of the net present value model. Without taxation, the net present value (NPV) is equal to the present value of future gross return, discounted at an appropriate interest rate less investment cost. An in-vestment project is therefore considered to be profitable when the NPV is positive. After introducing the corporate income tax, the present value of the asset generated from an in-vestment amounts to the sum of the present value of net return (gross return less taxes) and the tax savings, led by, for example, an incentive depreciation provision. In this study the theoretical approach is accompanied by a model simulation based on selected parameters. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p174&r=pbe |
| By: | Fumitoshi Mizutani; Tomoyasu Tanaka |
| Abstract: | The main purpose of this study is to determine whether public capital contributes to productivity growth and, if so, what kind of public capital contributes most. We analyze a dataset of 46 prefectures in Japan over 41 years, from 1955 to 1995, and estimate the production function as the first-differenced form. In the case where analysis was conducted using aggregate public capital, public capital shows a positive contribution to private production. However, we could find no clear productivity effects when using smaller components of public capital. Key Words: Public Capital, Productivity Effect, Infrastructure, Spill-over Effect JEL: Classification H50, H54, R53 |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p316&r=pbe |
| By: | Santiago Alvarez-García; Javier Salinas-Jiménez; David Cantarero |
| Abstract: | The main objective of this paper is to provide a general analysis of the evolution of the funding models of the Spanish Autonomous Communities (regional level) during the last decade and explore the main achievements of the new model (2001). In particular, the funding models that have been applied during these years are assessed comparing their results with the proponsed objectives that they tried to meet. Finally, special attention is paid to the developments achieved by the new model with respect to the previous one in terms of economic sufficiency (static and dynamic), joint responsibility for taxation and interregional solidarity measures. Key words: Federalismo Fiscal, Spanish Autonomous Communities, Economic Sufficiency, Fiscal Corresponsability, Interregional Solidarity. JEL classification: H7, H72, H77 |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p391&r=pbe |
| By: | José Antonio Díaz Fernández |
| Abstract: | Transport and communication infrastructures constitute one of the mainstays of regional development. The practice of this service attributed to transport and communication networks results in the genesis of a free flux of goods, capital, work and information throughout those regions which are enjoying the best territorial structuring. This way, investment in connectivity tends to encourage the creation of territorial access patterns which give rise, in their turn, to comparative advantages with regard to tertiary regional economies. This investment effort operates within the regional economies as a sort of drive motor. Firstly, it triggers the arrival of foreign capital, considered in terms of Direct Foreign Inversion (DFI). Secondly, the modernization of the transport network tends to have an effect on the industrial re-localization processes as well as on the steadily increasing diversification of the regional productive system. And thirdly, fixed social capital investment in transport tends to boost the action of two factors which are of the utmost importance. On the one hand, we can appreciate the increase of equal opportunity as well as of public property (general interest). On the other, we can see the territorial expansion of inter-territorial solidarity. This all would have a direct effect on regional economies, which would ultimately meet a steadily increase in social an economical cohesion rates. Keywords: Crowding-in, crowding-out, trade-off, fixed social capital, territorial connectivity, territorial accessibility, hinterland, public capital stock, inter-modality, modal chain, multimodality, operativity, Trans-European Transport Network (TEN), spillover effects, potential mobility demand. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p678&r=pbe |
| By: | Viktor Trasberg |
| Abstract: | The Baltic countries’ local governments have been functioned during the last decade in a permanently changing environment. Like other transition countries, they inherited from the past extremely centralized administrative system. Along with radical reforms, administrative system was decentralized and various functions were devolved from central to lower levels of government. Despite that, municipalities are still fiscally strongly dependent from central authorities. Often their fiscal capacity is not adequate to act in accordance with functions stipulated by laws. Many local governments’ revenues from taxes and user-charges are insufficient to finance efficiently their expenditures. Disparities in municipalities’ fiscal situation are correlated with unbalanced regional growth, social degradation in the low-income regions and growing differentiation by municipalities’ residents on access to education and healthcare. Membership of the European Union brings new tasks and responsibilities for the Baltic local governments. Municipalities should increase their economic sustainability and enhance administrative capacity to explore EU accession funds and implement EU policies. Considering the above-mentioned problems, the paper focuses on current fiscal situation of local governments in the Baltic countries. The main interest is to analyze local municipalities’ revenue level and structure, expenditure composition and fiscal autonomy conditions |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p153&r=pbe |
| By: | Justina A.V. Fischer |
| Abstract: | Direct democracy is believed to lead to an allocation of resources that is closer to the median voter's preferences. If, however, the median voter suffers from bounded rationality, the allocation of public goods actually achieved should be affected. Based on recent empirical findings by economic psychologists, optimism bias and availability heuristic are assumed to influence the median voter's preferences for public safety; particularly, (1) a preference for lower spending on crime prevention and (2) a preference for fighting property crime to fighting violent crime is hypothesized. In consequence, in more direct democratic systems, a re-allocation of scarce means in favor of property crimes should be observed. Estimation of a structural economic model of crime using Swiss cantonal crime rates from 1986 to 2001 corroborates these hypotheses. |
| JEL: | K42 D80 D70 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:usg:dp2005:2005-14&r=pbe |
| By: | Ignacio Lago-Peñas; Santiago Lago-Peñas |
| Abstract: | The quest for political support drives to upward deviations from forecasted public deficits when i) budget procedures are soft, ii) breaking promises involving higher expenditures and lower taxes is costly in political terms, and iii) ex–post control by voters and political opposition is imperfect. This hypothesis is tested using data from Spanish municipalities during the period 1985-1995. Econometric estimates show that single-party majority incumbents are less prone to change forecasted budgets. While their forecasted deficits tend to be higher, they have lower actual deficits, which may be interpreted as the consequence of a higher consistency in the budgetary process. Secondly, upward deviations in deficit tend to rise in election years. While forecasted deficits are not different in election years, actual deficits are. Moreover, elections cause systematic downward deviations in revenues. On the contrary, the ideology of the incumbent is not relevant to explain deviations in deficit. Key words: Budget deficits, local governments, budget procedures, electoral promises. JEL CLASIFFICATION: H74 |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p613&r=pbe |
| By: | Maria Manuel Pinho; Linda Veiga |
| Abstract: | We use a large and unexplored dataset covering all mainland Portuguese municipalities from 1979 to 2001 to evaluate the impact of political forces in the allocation of grants from the central government to local authorities. Empirical results clearly show that, besides variables that proxy the social and economic development of municipalities, political variables also condition the granting system: (1) grants increase in municipal and legislative election years; (2) the larger the number of years a mayor has been in office the larger the amount of funds transferred to his municipality; (3) municipalities ruled by mayors that belong to the prime-minister’s party are favored in the grants distribution process. Keywords: grants, intergovernmental relations, public choice, Portugal JEL classification: H77, D72, D78 |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p192&r=pbe |
| By: | M. Jose Prieto; Agustin Manzano |
| Abstract: | From to beginning of year 2002, the Spanish Autonomous Communities (CC. AA.) fiscal performance is conditioned by a new legal framework compounded from the financial agreement and the legislation on budget stability. This new framework implies a change in the CC. AA. fiscal behaviour. Are the CC. AA. ready to provide its citizens the public services they demand and fulfil its fiscal stability commitments? Are all the CC. AA. in the same position? Using political economic models and data on past budget execution, this paper is aimed at shedding light over the factors that jeopardize the CC. AA. budget stability in the future and the differences between CC. AA. relevant to its fiscal performance. JEL classification: H61, H62, H71, H72, H77 |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p262&r=pbe |
| By: | Ana Barreira; Rui Nuno Baleiras |
| Abstract: | The paper presents an intertemporal utility model that determines the effects of elections on the public expenditure composition. Conventional political budget cycle models describe incumbents as concerned only with the conditions that guarantee re-appointment. Aiming at achieving re-election, incumbents behave opportunistically in order to seduce voters about their political performance. The paper introduces another motivation for the manipulation of the public expenditure mix near elections: the incumbent’s concern with her future utility in the case of defeat. We provide data to suggest that both central and local governments in the European Union do manipulate the budget composition around election moments. In order to rationalise this observation, the paper proposes a model where voters and incumbent are rational, have complete information and no bias towards any category of public expenditure, namely consumption expenditure or investment expenditure. The paper shows that even under these extreme conditions, an electorally induced cycle on public expenditure mix is still expected, one where consumption expenditure raises relative to investment expenditure in pre-election periods. This opportunistic budget manipulation follows from two facts. First, any decision an incumbent makes on consumption expenditure pays back political dividends during the same period the expenditure is incurred, while any investment expenditure only becomes visible to voters with a one-period delay. Second, re-election is an uncertain event, which makes the second state of nature valuable. Outside politics, the incumbents’ pay back is a direct function of the voters’ assessment of the incumbents’ job while in office. The model is then extended to accommodate the scenario where voters and society at large do not share preferences. When voters or society evidence a preference prone to one of the public expenditure categories, a bias towards such category emerges in post-election periods. In pre-election periods two cases are found. Consumption expenditures exceed investment expenditures if either voters or society prefer the former category at the margin. The cycle’s nature is ambiguous if the marginal preferences of voters or society are biased towards investment expenditures. JEL classification: H50, E62. Keywords: Political Budget Cycles, Public Expenditure, Elections. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p291&r=pbe |
| By: | María A. García-Valiñas |
| Abstract: | In a context in which environmental protection have become in an important issue, the paper analyses which would be the optimal division of environmental policymaking functions among the different government levels. From the point of view of the fiscal federalism theory, we will design the most appropriate level of decentralization in each situation. In this sense, a proposal of decentralization has been shown, analyzing the consequences that a lax environmental policy could generate on future generations. Key words: Fiscal federalism, environmental policies, water management. Clasificación JEL: H77, Q25, Q28 |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p492&r=pbe |
| By: | Olivier Thomas |
| Abstract: | This paper aims at questioning the link between local finances and the economic dynamism of cities. This issue is based on the frequently stressed cases (by the media) of uncontrolled expenses of cities, increased level of local taxes and negative effects on local economics. This situation has been experimented in the cities of Briançon, Angoulême, and even in the little village of Eyne (Eastern Pyrenees) which had the biggest level of debt per inhabitant of the whole Europe in the beginning of the nineties. Therefore, as a starting point, the lack of neutral link between urban management and local attractive power of cities will be assumed. The relevance of the following assumptions will be considered : * assumption n°1 : the choice of the financial way to manage a city would positively influence economic dynamism, provided it would express the agreement with a “budgetary orthodoxy convention”.* assumption n°2 : conversely, local public management, insofar as it is based (notably) on debts and refers to what could be called “keynesian convention” would negatively influence the attractive power of cities.Thus, everything else equal, the more a city would be granted with important saving resources, the more it could afford to finance it own investments (or increased investments with a given rate of self-financing), the less financial expenses would lessen the functioning resources of the following year, etc … Moreover, a healthy financial management would improve the probability of a city to attract households and firms : if debts and local taxes can be restricted to a law level (in respect to the national average level, to the one of close competing cities …), then this law yearly increase of local taxes would not seem to shackle the dynamics of locations within a given city. The empirical part of this paper deals with the test of the relevance of the previous assumptions. Our sample is composed with all the 324 cities of the French Department of Tarn. The specific features of this sample are : the important number of statistical observations, the fact that all the cities of a local level, between metropolitan areas and Regions, are considered, the diversity of environments (rural, urban, agriculture, industry, dynamic or depressed industrial sectors), high of low proximity with an European metropolitan area (Toulouse), The attractive power of Tarn cities will be estimated by the increase (or decrease) of population. The assumptions will be tested thanks to ordinary least square regressions, and factor analysis. The database includes budgetary variables (budgets of cities, resources, expenses, savings, fiscal wealth, debts, investments, …), fiscal variables (local taxes, income tax, …) and also distances from each city to Toulouse, expressed in kilometres and in time. The conclusions will be detailed in terms of local planning, by comparing the impact of distance to fiscal “fixed” expenses. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p33&r=pbe |
| By: | Olga Ivanova |
| Abstract: | Discussions of road pricing have paid relatively small attention to the potential effects on the provision of public transport services in a region as depending upon the level of competition in a public transit sector. The present paper uses a fairly simple transport network equilibrium model of the greater Oslo region of Norway in order to investigate the impacts of road pricing upon the performance of bus transit sector. Empirical analysis is performed for the case of publicly and privately owned bus transit including the cases of monopoly, oligopoly and perfect competition. Analysis performed in the paper captures the present state of bus transit in the greater Oslo region as well as its possible future developments. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p107&r=pbe |
| By: | Alan Townsend; Janet Tully |
| Abstract: | In the UK the formal land-use planning system is once more at a crossroads with the unprecedented levels of public comment on the recent Governmental Green Paper on Planning. A recent international report on the planning process in Westernised countries highlighted a dearth of public participation in the UK planning system this is despite an obvious undercurrent of concern on environmental issues and the like. The paper sets out to gauge the extent of public interest in the Planning system, in the light of current proposals to revise it. The paper concentrates on the nature of public participation in Planning and to consider whether the public are more satisfied with process, seeing it as fair and robust, if they are more actively involved in the process of consultation. Other aspects to consider are the need to seek consultation from the wider public, not just individuals and special interest groups. There are several forgotten frontiers of the past effort to promote public participation. Theory dating from the 1970s exposed differences between sociological approaches in Planning and solutions tended to be lost in complexity of Local Development Plans. Subsequent theory (Healey 1997) has argued for the need to reconcile plural interests across localities. What is neglected in the research is the fuller appreciation of the actual public interest by those in the Planning system. A recent international report by Heriott-Watt University, Edinburgh and DePaul University, Chicago called for the notion of ‘public participation’ to be turned on its head and instead encourage the practice of ‘participatory planning’- the use of third parties to pre-mediate conflicts between stakeholders before and during the process of an open consultation as opposed to seeking public opinions after the plans have been drawn. This paper aims to review the modernising agenda and set out the case for shifting public participation to participatory planning within the context of the UK. Particularly pertinent due to recent recommendations to increase sustainability communities. It uses several qualitative case studies drawn from urban planning authorities and rural districts from the UK, which reveal Local Planning Authorities may be as yet unprepared to fully grasp the concepts underpinning the notion of participatory planning. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p51&r=pbe |
| By: | Linda Veiga; Francisco Veiga |
| Abstract: | The political article tests for rational political business cycles models on an unexplored and large data set of Portuguese municipalities. This data allows for a clean test of the models due to its high level of detail on expenditure items, an exogenous fixed election schedule and the homogeneity of local governments with respect to policy instruments and institutions. Estimation results clearly reveal the opportunistic behaviour of local governments, that in pre-electoral periods, increase expenditure on items highly visible to the electorate such as roads and street construction, in an effort to signal competence and increase their chances of re-election. JEL classification: H72, D72, D78 Keywords: political business cycles, public finance, local governments |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p427&r=pbe |
| By: | Pedro B. Moyano; Guillermo Aleixandre; Olga Ogando |
| Abstract: | Two main challenges influence the design of regional policies carried out by European, National and Regional policy makers. The first is the shift towards a knowledge-based economy, where enterprise competitiveness is increasingly linked to intangible assets. The second is the enlargement of the European Union that means important changes in the European Union marketplace and the possibilities of intervention in some less favoured regions. Until today, Regional Policy in many European Union countries has principally been founded on incentives for the creation of employment and investment in tangible assets. In this context, Spanish Regional Policy has been formulated, on the one hand, to achieve decentralisation of the entities responsible for its promotion and, on the other, to foster co-ordination and integration of Community, National and Autonomous Region interventions. Moreover, the design of this policy has taken into consideration the classical conflict between equity and efficiency. The objective of this paper is to assess the results and the gradual changes in regional incentive policy applied in Spain over the last 15 years and to identify the elements in which public intervention could be improved in order to adapt this policy to the demands laid out within the new environment previously defined. This assessment includes: firstly, a brief analysis of the evolution of public intervention; secondly, a study of the spatial distribution of the incentives over the period considered; and thirdly, a comparison of the economic performance of the different areas depending on the awards received. The analysis of this policy is based on a database comprising over 16 000 items referring to award decisions to applications for Regional Investment Grants (Law 50/1985 of 22 December 1985) gathered from the Official State Bulletin (Boletín Oficial del Estado, BOE) during the period 1988-2003. KEY WORDS: Spain, Regional policy, Regional incentive, Employment, Investment, Policy assessment |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p433&r=pbe |
| By: | Ramiro Gil-Serrate; Julio López-Laborda |
| Abstract: | The aim of this paper is to determine a theoretical linkage between tax decentralisation and regional growth. For this purpose a two fiscal tiers growth model is specified. First, working on Zou (1996) analytical framework, which account for the potential effects of intergovernmental policies on regional growth, a tax decentralisation process is brought in. Next its original model is expanded taking into account such process. It is shown that the effect of tax decentralisation on regional growth depends on the existing relationship between private and regional public capital productivities ratio and their stocks ratio square root. Finally a hypothesis for the Spanish economy is obtained. It will be checked empirically in subsequent work. Keywords: tax decentralisation; general equilibrium analysis; regional growth JEL classification: H70; O40; R13 |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p194&r=pbe |
| By: | Miguel Roig-Alonso |
| Abstract: | The size and pattern of any public budget depend, among other factors, on the visibility of both the burdens and the benefits of public revenue and public expenditure. Furthermore, such visibility is a necessary - not a sufficient - condition for an efficient allocation of resources between the private and public sectors of an economy. The aim of this contribution, based on a recent research, is to simultaneously present additive and arithmetic indicators for local, intermediate and central territorial government levels and to initially apply them to Spain by using data and information provided by the International Monetary Fund. Conclusions and comments are offered for general criticism, discussion, theoretical development and future application to other OECD countries. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p97&r=pbe |
| By: | Torben Dall Schmidt |
| Abstract: | National governments often choose to delegate tasks and burdens to lower levels in a comprehensive system of administration. Local and regional governance thereby becomes an important factor in policy implementation. This paper focuses on the incentive problem that follows from such a delegation of competences to collect taxes and do lending at the local level in a multi-level geo-administrative system. The paper uses the Danish administrative system to illustrate the actual outcomes from such incentive problems. A two-step estimation procedure will be used to derive results on the importance of incentive problems in multi-level geo-administrative systems. Setting up elaborate administrative systems will introduce agency problems that lead to inefficiencies in both local and national governance. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p281&r=pbe |
| By: | Mauricio Drelichman (University of British Columbia) |
| Abstract: | The widespread ennoblement of the Spanish bourgeoisie in the sixteenth century has been traditionally considered one of the main causes of Iberian decline. I document and quantify the surge in ennoblement through a new time series of nobility cases preserved in the Archive of the Royal Chancery Court of Valladolid and use the insights provided by lawsuits from several localities to model the rent seeking mechanisms at work in a game theoretical framework. I then validate the game against the data and use it to draw inferences about the unobserved redistributive activity in local politics. Contrary to established scholarship, I find that: 1) the tax exemptions granted to nobles cannot alone explain the flight to privilege, since ennoblement was more costly than the present value of the future tax benefits; 2) the central motivation behind ennoblement was to gain control of local governments and acquire decision-making power over common resources; 3) while ennoblement reflected a high level of redistributive activity, there is no evidence in the archival record linking it to the stagnation and decline of Spain. |
| Keywords: | rent seeking, nobility, local government, litigation, redistribution, institutions, institutional analysis, empirical method, game theory, Castile, Spain |
| JEL: | N43 H71 K4 |
| Date: | 2005–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0508004&r=pbe |
| By: | Marijana Sumpor |
| Abstract: | If the political climate is stable, local elections in Croatia take place every four years. Budgets are planned for three years, while strategic development programmes cover periods of five to ten years. Technically, the political, financial and developmental programming cycles can be matched, and implementation of the programmes ensured. However, political programmes are generally vague, budgets are every so often fictive and revised mid year and development programmes grow into visionary shopping lists. Reality shows that programmes and plans are elaborated, presented in public and then neatly put into drawers. In the aftermath, local politicians are concerned mainly about the financing flows and this is what they are usually fighting for at council meetings and in various ministries. Regularly, local administration proceeds according to the wishes of the political decision makers, without referring to any program in the end. Consequently, political accountability is lacking, fiscal management is not transparent and development is lagging behind. The main aim of this paper is to show how strategic development programmes, budgetary plans and political programmes can be linked in the Croatian socio-economic and institutional environment. Also, in line with the initiated process of decentralization in Croatia, local governments have to improve their fiscal management in order to be able to take over new functions and responsibilities. Since by now a number of local development programmes exist in Croatia, where a participatory and strategic development planning approach was applied, an analysis of the political programmes, local budgets and development programmes can be done. The purpose of this research is to demonstrate that if local governments better understood the interdependencies between these three segments, they could create reference points for their actions visible in their programmes and budgets. In this way a platform could be created to enhance the political accountability, improve fiscal capacity and fulfil developmental goals in line with real needs and potentials of the local population. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p99&r=pbe |
| By: | Ana Bela Santos Bravo; António Luís Silvestre |
| Abstract: | This paper aims at presenting a simple model of local decision-making based on the hypothesis of “constrained” monopoly power on the part of local governments. It adds the contribution of the principal-agent theory by assuming that: (a) monopolistic behavior is constrained by voters’ efforts to monitor the outcomes of policies; (b) local governments’ policies affect local property values. An empirical test of the model for the Portuguese local authorities indicates that the hypothesis of “monitoring” may be accepted and that of capitalization can only be accepted in relation to local public services not to local taxes on property. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p576&r=pbe |
| By: | Marta Ferreira Dias; Ricardo Silva |
| Abstract: | Over the last decades, the Portuguese economy exhibited an outstanding growth performance. This period of fast economic growth allowed the country to consistently reduce its income gap with respect to the EU average. In spite of this, regions in Portugal exhibited large differences between each other in terms of GDP per capita. Yet, the Portuguese government did make attempts at regional intervention by means of some policy instruments, namely public transfers to local (and regional) government. How successful these policies have been in terms of achieving their goal is still an open question, especially as far as Portuguese Central Government transfers are concerned. The main purpose of the paper is to evaluate if the system of Central Government transfers has affected the intra-regional Portuguese convergence. We haven’t found unquestionable evidence that these policies have been effective at stimulating convergence among Portuguese regions and at improving the overall economies of the poorer regions. Keywords: Regional convergence, Central Government transfers, Regional policy JEL Classification: H71; O18; R58 |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p443&r=pbe |
| By: | Maria Jesus Delgado Rodriguez; Inmaculada Alvarez Ayuso |
| Abstract: | This work decompose labor-productivity grotwh and convergence in EU into components attributable to technological change (shifts in the European production frontier), technological catch-up (movements toward or away from the frontier) and factor accumulation (movement toward or away from the frontier). This work extends previous researchs considering public capital and human capitas as additional productive inputs and analysing its separate constribution to convergence as components of factor accumulation. In the case of human capital, we also test its rate effect as determinant factor of technical change. With this purpose we applied the Malmquist index of total factor productivity to an European data base to provide evidence for the 15 EU State Members. The results show that growth is primarily driven by factor accumulation which contribution is fundamental for lagging countries. We do not find evidence of any significant convergence over the whole period studied related to integration with factor accumulation and efficiency change as important factors of convergence while technical change (encouraged by greater human capital) has worked against it. Key words: Human Capital, Malmquist Index, Source of Convergence. JEL Classification: O47 H54 D24 |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p164&r=pbe |
| By: | Rui Henrique Alves |
| Abstract: | More than fifty years after the Schuman Declaration, Europe is still far from a real Political Union. In fact, Europe faces an important imbalance between the two sides of the integration process, appearing as an important actor in the international economic scenario, but as a minor actor in the international political arena. In this paper, we start by arguing that the “small steps” strategy that led Europe until the present situation is no longer sufficient to let the Union efficiently overcome its present deficits and challenges. So, we call for an important change in the institutional and economic organisation of the EU, towards a model of largely decentralised federalism. By examining the present challenges for EU and the characteristics of the proposal for an European Constitution designed by the Convention, as well as comparing the main federal systems existing in the world today, we argue that the mentioned proposal is not enough to give the EU a strong voice both in the political and the economic areas. In this context, we discuss the design of an adequate institutional framework for the political organisation of the EU, presenting an alternative proposal based on the characteristics of a truly federal system, also as its consequences in what concerns the design and implementation of European economic policies. Keywords: European Union, Political Union, Federalism, Fiscal Federalism, European Constitution |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p652&r=pbe |
| By: | Mário Rui Silva; Hermano Rodrigues |
| Abstract: | In this contribution, we analyse the pattern of the so-called PIP (Partnerships and Public Initiatives) that have been approved between 2000 and mid-2003 in the POE1 framework. In particular, we will evaluate the extent of decentralisation that this new instrument has generated in competitiveness policy. Partnership approaches are a relatively recent phenomenon, but partnerships have received widespread attention and support from economic and political agents, including policy makers at national, regional and local levels. In fact, the term “public-private partnership” covers a wide range of concepts and practices. In our contribution, we will focus on partnerships in a competitiveness policy framework. In a first section, we discuss briefly the meaning and the extent of what we call competitiveness policy. Then, in a second section, we focus our attention in public-private partnerships as a specific instrument for policy. In particular, we make a first assessment on the distinctive principles that differentiate public-private partnerships from more traditional instruments such as direct investment in public agencies or direct subventions to firms. We follow the perspective that these principles, mainly decentralization of policy, may contribute to a greater effectiveness of policy, because a more decentralised policy is supposed to increase focus and accountability and to involve agencies with specialized skills and a more narrow range of objectives. But, also, we will refer that some inefficiencies and some lack of equity may arise from the use of private-public partnerships instrument. Finally, in the main section of this contribution, we will analyse the above-mentioned questions considering the case of the 131 PIP projects approved and financed by the POE between 2000 and mid-2003. As the major part of the variables used are nominal, and in order to define the decentralization pattern induced by this new instrument, we will use multivariate data analysis techniques in order to establish associations between several variables linked to decentralisation criteria and, also, to identify clusters of projects. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p299&r=pbe |
| By: | Marcus Adolphson |
| Abstract: | Changes of land use pattern and urban form could be seen as a dynamic result of the trade off by public and private interests. Private interest – individual residents or firms – tries, according to micro economic theory, to maximize their individual utility. Public interests – conveyed by government institutions on different geographical levels - on the other hand, try according to macro economic theories to maximize the general welfare in a community according to the preferences of the political system. The focus is to measure the importance of spatial locations factors regarding new residential and commercial buildings in relation to the existing urban form, political guidelines and ecological features. In the region transportation infrastructure systems, as high speed commuting train and highways, have been implemented in the middle of the period. The time period investigated is 1992-2000. The importances of the location factors were obtained by logistic regression analysis and transformation of the ß -values into elasticities. The dependent variables were settlements of new urban elements in pixels of 50*50 meters. Independent variables where distances to existing urban elements, presence of public interests and some ecological features as south faced hill slopes, distance to water areas and geology. Results from this projects reveals that new urban settlements in general are located in proximity to existing urban settlements of the same kind, in remotness to existing urban focal points and to some extend within planned areas. National/regional transportation nodes do not have any apparent influence on the location. A general conclusion from this investigation is that the built environment develops towards a further dispersed rural spatial pattern though with some correspondence to the comprehensive land use plan. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p684&r=pbe |
| By: | Voxi Heinrich S. Amavilah (Glendale & REEPS) |
| Abstract: | What determines the wealth of nations? If anyone knew the answer to that question, no-one would have heard of Adam Smith as an economist, and for that matter all economists. Economics is really the study of wealth creation under scarcity. The reason economists and others have a hard time pinning down the causes of wealth is that wealth is costly to measure, and many factors and forces are potential determinants. This paper describes, in a simple way, wealth accounting by extending the data assembled by a recent World Bank study. The extension will benefit those seeking to run time-series, cross-section, and/or pooled data regressions to assess how wealth is determined. But even from this simple data mining exercise alone the results indicate significant increases in the wealth of the 92 countries in this sample. From the theoretical standpoint the World Bank’s expanded measure under-estimates the wealth of developing countries. Yet, even if the income (GDP) component of their wealth has fallen, total national wealth has increased. The policy implications of this essay are tentative until empirical analysis is carried; even so, the results seem to suggest that GDP is a necessary but not a sufficient requirement for wealth. |
| Keywords: | national wealth; Alfred Marshall on wealth, estimating wealth, World Bank’s national wealth estimating |
| JEL: | H00 O15 O49 |
| Date: | 2005–08–19 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpdc:0508007&r=pbe |
| By: | Kondoh Kenji |
| Abstract: | This paper investigates permanent and temporary immigration and remittance under the coexistence of unionized and non-unionized manufacturing firms in a two-sector economy. The impacts of immigration as well as remittance on respectively wages, employment, the union-nonunion wage gap and national welfare are analyzed. It is found that permanent immigration brings positive effects on most variables (except the competitive wage), but enlarges the wage gap and causes income redistribution. The effects of temporary immigration diverge depending on which sector immigrants are allowed to work in and which good is remitted more heavily. In particular, if temporary immigrants work in manufacturing only, then all wages and the union-nonunion wage gap fall. JEL Classification Numbers: F22, J51 Keywords: Temporary and Permanent Immigration, Labor Unions, Remittance, Wages |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p58&r=pbe |