nep-pub New Economics Papers
on Public Finance
Issue of 2005‒06‒19
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Political Economy of Portuguese Intergovernmental Grants By Linda Gonçalves Veiga; Maria Manuel Pinho
  2. Welfare Analysis of Debt Policy during Recessions By Takayuki Ogawa

  1. By: Linda Gonçalves Veiga (Universidade do Minho - NIPE); Maria Manuel Pinho (Universidade do Porto)
    Abstract: We use a large and unexplored dataset covering all mainland Portuguese municipalities from 1979 to 2002 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 proxi local population needs and the macroeconomic situation of the country, political variables 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/her municipality. These effects are particularly strong for grants that are not formula-determined.
    Keywords: political economy, intergovernmental relations, grants, Portugal.
    JEL: H77 H59 D72
    Date: 2005
  2. By: Takayuki Ogawa (Institute of Social and Economic Research, Osaka University)
    Abstract: This paper develops an overlapping-generations model with nominal wage rigidities and examines the welfare effects of debt policy during recessions. Issues of public debt stimulate aggregate consumption demand and create employment. Future generations then face both increased wage incomes and higher taxes. If the amount of outstanding bonds is already large, debt policy deteriorates the welfare of future generations by levying heavy taxes. By contrast, if the outstanding bond issue is relatively small, debt policy can be Pareto improving by creating more employment. Therefore, the welfare implications of debt policy during recessions can be discriminated from those during booms.
    Keywords: debt policy, overlapping generations, welfare effects.
    JEL: E12 E24 H63
    Date: 2004–07

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