Accounting practice,fiscal decentralization and corruption

In prior studies, accounting and decentralization corruption solutions have so far been analysed in isolation. In this article, we connect these two strands of literature on corruption. Understanding this connection is important because weak financial accounting and reporting systems can inhibit monitoring incentives and thus reduce decentralization benefits in countering corruption. We argue that the effectiveness of decentralization as an anti-corruption barrier is complemented by the quality of the accounting practice in a country. Using multiple sources of data, we find that decentralization has a positive and increasing effect on reducing corruption among countries with a high-quality accounting practice. In contrast, decentralization has a negative and decreasing effect on reducing corruption among countries with weak-quality accounting practices. These findings are robust to alternative measures of accounting, decentralization and corruption and to endogeneity tests. Our findings demonstrate the crucial information role of accounting in enhancing decentralization monitoring mechanisms and in thereby reducing corruption.     

政策不确定性、财政扩张与区域商业银行风险——基于中国地方官员变更和银行业的证据

文章利用2007-2017年我国93家区域商业银行的面板数据，并结合省级宏观经济数据和地方官员变更数据，实证考察了中国地方官员变更引起的经济政策不确定性对区域商业银行风险的重要影响。研究结果表明：（1）地方官员变更引起的政策不确定性增大了区域商业银行风险；（2）地方官员变更引起的政策不确定性，通过提高银行的资产收益率降低了商业银行风险；而不确定性时期的财政扩张，通过降低银行资产收益率增大了商业银行风险；并且财政扩张的负面影响大于政策不确定性的正面影响；（3）各省的市委书记发生职位更替引起的政策不确定性对区域商业银行风险的影响更大。文章研究为新时代背景下的金融供给侧结构性改革、政府宏观经济政策的制定以及财政体制与金融体制之间的联系提供参考。     

Fiscal decentralization, revenue and expenditure assignments, and growth in China

Theory suggests that a close match between revenue and expenditure assignments at sub-national levels benefits allocative efficiency, and hence economic growth. That is, a convergence of revenue and expenditure assignments at sub-national levels of government should, according to the theory, be positively associated with a higher growth rate. In the case of China, this paper shows, divergence, rather than convergence, in revenue and expenditures at the sub-national level of government is associated with higher rates of growth. A panel dataset for 30 provinces in China is used to examine the relationship between fiscal decentralization and economic growth over two phases of fiscal decentralization in China: (1) 1979–1993 under the fiscal contract system, and (2) 1994–1999 under the tax assignment system. The seeming contradiction between the theory and evidence in the China case is reconciled by taking into account the institutional arrangements that prevailed during the two phases of fiscal decentralization, in particular the inconsistency between the assumptions of the theory of fiscal decentralization and the institutional reality of China.     

Integrating local ecological services into intergovernmental fiscal transfers: The case of the ecological ICMS in Brazil

Local conservation efforts are often related to benefits at higher governmental levels. On the one hand, these efforts are strongly connected to local land-use decisions. On the other hand, activities such as sustainable water management or biodiversity conservation are associated with regional, national or even global public goods. Therefore, spatial externalities or spillovers exist, which—if not adequately compensated for—lead to an underprovision of the public goods and services concerned. This article investigates intergovernmental fiscal transfers as an innovative instrument for compensating local jurisdictions for the ecological goods and services they provide across local boundaries. From a public finance perspective, fiscal transfers are a suitable instrument for internalising spatial externalities. However, most federal states use this instrument predominantly for social and economic public sector functions rather than for ecological ones. This article investigates the case of the ecological “ICMS” that was first introduced by a few states in Brazil during the 1990s. Part of the revenue from this value-added tax is redistributed to the local level on the basis of ecological indicators. In this way, the state level uses fiscal transfers to compensate municipalities for the existence of protected areas and other ecological services provided within their territories. The Brazilian experience illustrates that such fiscal transfers can represent both a compensation for land-use restrictions and an incentive to value and engage in more conservation activities at the local level.     

Accrual accounting and Australian fiscal policy

Australian governments have recently moved from cash accounting to accrual accounting. Accrual accounting has been accompanied at the national government level by the introduction of a new key fiscal policy measure: the ‘fiscal balance’. This paper explains and evaluates this new fiscal measure. It concludes that, given the present fiscal policy of the Australian government, fiscal balance is a superior fiscal policy measure to the ‘cash’ budget balance measure which it replaced. However, from the alternative ‘golden rule’ policy standpoint, fiscal balance is not a meaningful fiscal policy measure — although its stock counterpart, net financial liabilities, certainly is.     

Tax Base and Crowding‐in Effects of Balanced Budget Fiscal Policy

A dynamic general equilibrium business cycle model is constructed with staggered price adjustment, monopolistic wage setting and distortionary taxation. The government purchases goods, runs an unemployment benefit system and balances its budget through a proportional tax on labour income. A temporary tax‐financed increase in government expenditures can lower the tax rate through a demand‐induced widening of the tax base. It is shown analytically that this allows private consumption to rise, under realistic conditions, despite the negative wealth effect of increased fiscal spending.     

Taxation, growth, and the spirit of capitalism

This paper uses a general two-sector model of endogenous growth to examine how the spirit of capitalism affects the relation between public finance and growth. The spirit of capitalism is defined as acquisitive personal objectives. We find that if the spirit of capitalism is present, an increase in the share of government spending in output reduces the long-run growth rate. The negative relationship between fiscal spending and growth is consistent with empirical evidence.     

Intergovernmental transfers and fiscal behavior insurance versus aggregate discipline

This paper evaluates the trade-off between the advantages of risk sharing and the perils of common pool problems in federal fiscal arrangements. Under the assumption of asymmetric information we evaluate two alternative regimes of intergovernmental transfers. In one regime, the central government pre-commits to a certain level of transfers that compensate vertical fiscal imbalances and provide some limited ex-ante insurance. In the other regime, it accommodates ex-post the fiscal needs of the different provinces. In this second case, full-insurance results, but the economy is subject to a tragedy of the fiscal commons, with excessive subnational spending, insufficient local taxation, and reduced production of federal public goods. We find the range of parameters for which one or the other institutional regime will be preferable. The result is a fiscal-federalism version of the usual trade-off between rules and discretion.     

On measuring the wealth of nations: the US economy, 1964-2001

This paper examines the methodology of Shaikh and Tonak (Measuringthe Wealth of Nations, 1994) underlying their calculation ofestimates of productive labour in the US economy from 1964 to2001. The focus is not on the results but on the methods thatgenerate them. The paper finds that the compromises made byShaikh and Tonak because of data unavailability are unreliable,and that better approximations are possible. On this latterbasis, the Shaikh and Tonak methodology can be used to providethe labour and wage estimates needed for empirical investigationsin the surplus-based tradition.     

Mechanisms for controlling expenditure in the Spanish Royal Household, c.1561-c.18081

The purpose of this article is to examine the accounting and auditing in the Spanish Royal Household between 1561 and 1808. The Royal Household was the third most important item of expenditure that the State Treasury financed, after the Army and Navy and the National Debt. On studying spending control in the Royal Household, we have rejected the idea, often advanced by historiography, that there was no spending control within this institution. On the contrary, treasurers and accountants were only able to release funds for expenditure purposes on the basis of prior authorization. However, the efficiency of spending control was very limited due to technical, administrative and, above all, social and political elements.