nep-pbe New Economics Papers
on Public Economics
Issue of 2010‒02‒20
fifteen papers chosen by
Oliver Budzinski
Philipps-University of Marburg

  1. India's Public Finances: Do They Matter By Paul Rawkins
  2. What shapes local public transportation in Europe? Economics, Mobility, Institutions, and Geography By Germa Bel; Daniel Albalate
  3. Reframing the EU budget- decision-making process By Indhira Santos; Susanne Neheider
  4. Distributional Implications of Tax Evasion in Greece. By Manos Matsaganis and Maria Flevotomou
  5. Public investment under fiscal constraints By Alessandro Missale; emanuele bacchiocchi; elisa borghi
  6. Convergence to EMU through the Test of the Public Finance –Romania’s Budgetary Deficit and Public Debt By Susanu, Monica
  7. A better process for a better budget By Susanne Neheider; Indhira Santos
  8. Economic Crisis and Public Sector Reform: Lessons from Ireland By Niamh Hardiman
  9. New Forms of Public Service Delivery – are they really valuable? By Carvalho, Cláudia; Brito, Carlos
  10. Estimating the size of the European stimulus packages By Jakob von Weizsäcker; David Saha
  11. Innovative Public Service Delivery: How to assess the new relationship between public agencies and society? By Carvalho, Cláudia; Brito, Carlos
  12. Spatial Competition and Cross-border Shopping: Evidence from State Lotteries By Brian G. Knight; Nathan Schiff
  13. A Patchwork Safety Net: A Survey of Cliometric Studies of Income Maintenance Programs in the United States in the First Half of the Twentieth Century By Price V. Fishback; Samuel Allen; Jonathan Fox; Brendan Livingston
  14. Romania's public debts and their consequences upon the economy By Popa, Ionela; Codreanu, Diana; Albici, Mihaela
  15. From Public to Private: Privatization in 1920's Fascist Italy By Germa Bel

  1. By: Paul Rawkins
    Abstract: India’s general government deficits and public debt have remained high despite faster economic growth in recent years and periodic attempts to instil greater fiscal discipline. Modest fiscal tightening at the centre has been offset by significant fiscal slippages at the states level, leaving the general government deficit largely unchanged as a percentage of GDP.
    Keywords: fiscal, India, government, deficits, GDP, public debt
    Date: 2010
  2. By: Germa Bel; Daniel Albalate
    Abstract: This paper analyzes the factors that explain supply and demand of local public transportation. Together with variables related to economics and mobility, we consider variables reflecting institutional characteristics and geographical patterns. Being a political capital increases supply and demand of local public transportation, inequality is associated with higher supply, and contracting out reduces supply. Furthermore, our regional analysis allows us capturing the effect of geographical characteristics and different traditions of government intervention. In all, we provide first evidence on the role played by institutional and regional characteristics useful to achieve a better understanding of local public transportation supply and demand.
    Keywords: Urban transportation,Local government,Mobility,Institutions and Geography
    Date: 2009–07–03
  3. By: Indhira Santos; Susanne Neheider
    Abstract: This paper traces the history of the EU budget and draws lessons for the review to come. Whatever reforms are proposed, the authors believe that they must serve to shift spending to policy areas and instruments where the EU can best add value while at the same time recognising the political need for member states to present EU budget negotiation results in net-balance' terms. A two-stage negotiation is proposed: first member states should negotiate and agree on what constitute EU public goods. Everything else would thereafter - by default - be deemed redistributive/compensatory spending to be financed on the basis of member states' current overall net balances.
    Date: 2009–05
  4. By: Manos Matsaganis and Maria Flevotomou
    Abstract: The shadow economy and tax evasion are both widespread in Greece. This has adverse effects in terms of horizontal and vertical equity, as well as in terms of efficiency. We take advantage of access to a large sample of income tax returns in 2004/05, and compare tax reported incomes with those observed in the household budget survey of that year. We re-weight our two datasets to make them fully comparable, and carefully select the reference population. We then calculate ratios of income under-reporting by region and income source. The synthetic distribution of reported incomes is then fed into a taxbenefit model to provide preliminary estimates of the size and distribution of income tax evasion in Greece. Income under-reporting is estimated at 10%, resulting in a 26% shortfall in tax receipts. The paper finds that the effects of tax evasion are higher income inequality and poverty, as well as lower progressivity of the income tax system.
    Keywords: tax evasion, inequality, microsimulation.
    Date: 2010–01
  5. By: Alessandro Missale (University of Milan); emanuele bacchiocchi (University of Milan); elisa borghi
    Abstract: EU New Member States must comply with the Stability and Growth Pact (SGP) and the investment requirements implied by the Lisbon Agenda. However, the SGP rules may result in underinvestment or distortions in the allocation of public expenditure. This paper provides new evidence on the effects of debt sustainability and SGP fiscal constraints on government expenditure in fixed capital, education and health in OECD countries by estimating government expenditure reaction functions to public debt and cyclical conditions. We find that, at high levels of debt, government capital expenditure and education expenditure are significantly reduced as the debt ratio increases in all OECD countries independently of EMU (or EU) membership. By contrast neither capital expenditure nor education expenditure is affected by the debt ratio in low debt countries. These findings are robust to the inclusion of the government deficit in the estimated reaction functions. Hence, it appears that EU countries have been constrained in their investment decisions more by the need to ensure debt sustainability than by the rules of the SGP. In low debt NMS countries public investment even increases with the debt ratio, a finding that is reassuring for their growth prospects. However, a less optimistic picture emerges when we focus on expenditures in public health and education, as it appears that NMS governments cut such expenditures --even at low levels of debt-- as the deficit increases. Problems in controlling total expenditure together with the preventive arm of the SGP may have penalized investment in human capital in NMSs while leaving fixed capital investment unaffected.
    Keywords: government capital expenditure, government education expenditure, public investment, debt sustainability, EU New Member States, Stability and Growth Pact,
    Date: 2009–11–04
  6. By: Susanu, Monica
    Abstract: The convergence criteria group together those macro variables whose dimensions mean to put in good use, to potentiate and to strengthen the major benefits of integration, as their configuration, either before and especially after the adhesion in EU, represents strict and compulsory requirements for each state. The very reason stands in the strategic target of adopting euro currency, as an advanced phase of the integration which thus brings together the negative integration – meaning the abolition of the various obstacles in common market functioning -, with the positive integration – that means that minimum action of the public authority mainly aimed to ensure the coordination and harmonization of the economic policies. Either budgetary deficit and public debt contain the quintessence of the convergence efforts in taking into account the public finance, since both indicators exhaustively mirror the government’s administration and interventionism, and reflect its practices and macroeconomic policies strategies. At the same time, they contain information and facilitate estimation and prognosis concerning not only that country’s estate and future, but the Union’s stability and future as well, since it represents an integrated system of many countries, a unitary whole of common goals and interests. The globalization is the outstanding economy’s characteristic either in present and future tense, which is a fact obviously confirmed by the propagated negative effects of the recent financial crises. The increasing importance of evaluating each country’s budgetary deficit and public debt, as much as each country is a part of a whole, is henceforth a reliable link for the member states of this great system. The globalization also favours the access and the extension of a multitude and various risks, which are able to penetrate through any split of any size. These public finance indicators are instruments enabled to operate as a primary and decisive court meant to signal and to preview the threatens against the system’s structure and stability, to prevent and remove these dangers, and also to heal long-term and bad effects.
    Keywords: budgetary deficit; public debt; the convergence criteria
    JEL: H62 G18 H68 H63
    Date: 2009–04–04
  7. By: Susanne Neheider; Indhira Santos
    Abstract: This policy brief provides a practical solution to facilitate reform of the EU budget decision-making process, overcome the detachment of EU spending from political priorities and increase focus on EU public goods. As the negotiations for the next financial framework are expected to start in less than two years, the window of opportunity for reform is closing rapidly. Additional pressure arises from the need to design a substitute, by Spring 2010, for the Lisbon Strategy that better aligns EU policy goals and spending. For the authors now is the time for reform.
    Date: 2009–07
  8. By: Niamh Hardiman (UCD School of Politics and International Relations)
    Abstract: Reception and implementation of public sector reform ideas varies across countries. Westminster-type systems (Britain, New Zealand, Australia, and Canada) adopted New Public Management ideas most enthusiastically. Ireland was slower to do so. Continental European countries were the least enthusiastic. This gives us some insight into the political and organizational conditions that underpin adoption of NPM, and of post-NPM, which now coincides with international economic difficulties. The Irish experience provides a useful prism for analysing the issues involved in seeking to alter the ‘public service bargain’ under conditions of economic crisis. Membership of the Euro provides protection against currency collapse, but also entails severe cost adjustment measures without the cushion of devaluation. The reassertion of central management of budget allocations involves making stark choices between the numbers employed, the volume of services delivered, and the rate of remuneration of employees. The options facing government depend not only on the scale of fiscal problems, but also on the manner in which the crisis is politically managed and the legitimating strategies available.
    Date: 2010–02–09
  9. By: Carvalho, Cláudia (Universidade Portucalense); Brito, Carlos (University of Porto-Faculty of Economics)
    Abstract: One of the major challenges currently faced by Public Administrations is the creation of more value for both citizens and firms, mainly because of the increasing budgetary constraints and challenging demands from society. In fact, in the last two decades there has been a general movement of public reform in almost all developed countries, and for this reason it became essential to understand how users assess public services’ quality. This paper aims precisely at understanding which the determinants of public services’ quality are. Due to the nature of the research problem, the case-study methodology has been chosen. Thus, this paper presents the case-study of Citizen Shops in Portugal, a recent and innovative channel of public services’ delivery, within a strong relational perspective. This research involved an extensive qualitative and quantitative data collection. The main findings and implications are presented and discussed.
    Keywords: public services; Citizen Shops; quality determinants; satisfaction; dissatisfaction
    JEL: H40 M31
    Date: 2009–07–31
  10. By: Jakob von Weizsäcker; David Saha
    Abstract: David Saha and Jakob von Weizsäcker present the latest breakdown of the fiscal stimuli in the 13 largest EU economies and compare the total European package for 2009 to the US stimulus package. The authors estimate the size of the European stimulus packages to increase to 0.99% of GDP following increases in the stimulus packages in the Netherlands, the UK and Germany . The US stimulus package is estimated at about 1.7 percent of GDP, substantially above the EU average but only marginally above the largest national stimulus package in the EU.
    Date: 2009–04
  11. By: Carvalho, Cláudia (Universidade Portucalense); Brito, Carlos (University of Porto-Faculty of Economics)
    Abstract: One of the major challenges faced by the Public Administration is how to create more value for both citizens and firms, mainly because of the increasing budgetary constraints and challenging demands from society. In fact, over the past two decades there has been a general movement of public reform in most developed countries, and for this reason it is essential to understand how users assess public services’ quality. This paper aims at understanding the determinants of public services’ quality. Due to the nature of the research problem, we have adopted a case-study methodology. The research involved an extensive qualitative and quantitative data collection with managers, citizens and front and back-office public servants, by means of interviews, questionnaires and focus groups. The paper presents the case of Citizen Shops in Portugal, a recent and innovative channel of public services’ delivery, within a strong relationship perspective. Firstly, it explores the kind of relationships that are developed during the public service encounter between the citizen, the public organization and society. Secondly, both citizen’s satisfaction and dissatisfaction with public services are investigated. The basic premise is that these two concepts are not opposite but have different determinants instead. Furthermore, the paper also explores the existence of a zone of tolerance and emphasizes the importance of managing emotions in the public service encounter. Finally, it is discussed that public services’ quality assessment should also take into consideration the implications on the value to society.
    Keywords: Public services; citizen shops; quality determinants; satisfaction; dissatisfaction
    JEL: H40 M31
    Date: 2009–07–31
  12. By: Brian G. Knight; Nathan Schiff
    Abstract: This paper investigates competition between jurisdictions in the context of cross-border shopping for state lottery tickets. We first develop a simple theoretical model in which consumers choose between state lotteries and face a trade-off between travel costs and the price of a fair gamble, which is declining in the size of the jackpot and the odds of winning. Given this trade-off, the model predicts that per-resident sales should be more responsive to prices in small states with densely populated borders, relative to large states with sparsely populated borders. Our empirical analysis focuses on the multi-state games of Powerball and Mega Millions, and the identification strategy is based upon high-frequency variation in prices due to the rollover feature of lottery jackpots. The empirical results support the predictions of the model. The magnitude of these effects is large, suggesting that states do face competitive pressures from neighboring lotteries, but the effects vary significantly across states.
    JEL: H20 H70
    Date: 2010–01
  13. By: Price V. Fishback; Samuel Allen; Jonathan Fox; Brendan Livingston
    Abstract: Social welfare programs in the United States are designed to serve as safety nets for people in hard times, in contrast with the universal approach found in many other developed western nations. In a survey of Cliometric studies of social welfare programs in the U.S., we examine the variation in the safety net in the U.S. across states in the 20th century, the determinants of the variation, and its impact on socioeconomic outcomes. The U.S. has always displayed substantial variation in the extent of the safety net because the features of most public social welfare programs are and were determined by local and state governments, even after the federal government became involved. Differences across states persist strongly for typically a decade, although the persistence weakens with time, and there are some periods when federal intervention led to a re-ordering. The rankings of state benefits differs from program to program, and economic and political factors have different weights in determining benefit levels in panel data estimation of their effects. Variation in benefits across programs during the early 1900s had significant impact on labor markets, economic activity, family formation, death rates, and crime.
    JEL: H53 H75 N32 N42 R50
    Date: 2010–01
  14. By: Popa, Ionela; Codreanu, Diana; Albici, Mihaela
    Abstract: In June 2009, Romania’s public debts rose by 12.6% more than late last year, that is up to 123.61 billion Lei (29.4 billion Euros), meaning 23.27% of the gross domestic product originally estimated for this year. Foreign loans are not a new phenomenon. Yet, in the current economic context, it is the consequences which might occur that bother most of us as a result of the (significant) increase of public debts. Concluding a loan agreement with the International Monetary Fund is « necessary evil » because it has both advantages and disadvantages. This paper aims at analyzing aspects regarding the benefits, direct and indirect costs, and social effects of such a loan.
    Keywords: public debts; elbows; benefits; economy
    JEL: F34 G38 H63
    Date: 2010–02–09
  15. By: Germa Bel
    Abstract: Italy’s first Fascist government applied a large-scale privatization policy between 1922 and 1925. The government privatized the state monopoly of match sale, eliminated the State monopoly on life insurances, sold most of the State-owned telephone networks and services to private firms, reprivatized the largest metal machinery producer, and awarded concessions to private firms to build and operate motorways. While ideological considerations may have had a certain influence, privatization was used mainly as a political tool to build confidence among industrialists and to increase support for the government and the Partito Nazionale Fascista. Privatization also contributed to balancing the budget, which was the core objective of Fascist economic policy in its first phase.
    Keywords: Privatization,Public Enterprise,Government,Fascist Economy,Italy
    Date: 2009–09–01

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