Sub-Saharan Africa's rising public debt stock: Is there a cause for concern?

The study investigated public debt sustainability in sub-Saharan Africa (SSA) by testing the reaction of the primary balance to positive and negative shocks in public debts in a panel of 45 SSA countries. The study adopts the innovative nonlinear fiscal reaction function and the dynamic panel threshold model to account for the potential asymmetric phenomenon in the public debt series. In line with extant studies, the study found that public debts in SSA are weakly sustainable and there is a highly procyclical fiscal policy bias in SSA countries, particularly in resource-rich countries, indicating that governments' fiscal policy responses are expansionary during economic upturns and contractionary during recessions, which may aggravate recessions and worsen debt situations across SSA. For robustness, the study compares the results with emerging and developed economies. The results indicate that in advanced economies, public debt is sustainable and that fiscal policy response is countercyclical. The research and policy implications are discussed.     

Indonesia's Law on Public Services: changing state–society relations or continuing politics as usual?

Institutional reforms introduced after the collapse of the New Order regime have brought state–society relations in Indonesia under increased scrutiny. This paper uses an evaluation of Law 25/2009 on Public Services as a means to assess whether the new political setting has increased the leverage of the citizenry over the state. Adopted in July 2009, the law introduced a range of regulations for public service providers. It also expanded the responsibilities of the Ombudsman's office and called for the establishment of citizen committees to monitor public service delivery. However, the legal quality of the law is poor and the broader institutional and political environment is not conducive to its enforcement. Overall, the law aims beyond the capacity of the current political and legal system. Ironically, in order for society to gain greater leverage in politics, state capacity must increase as well.     

Restructuring Ukrainian enterprises after privatization: Does ownership matter?

This paper presents data from a survey of large and medium-sized industrial enterprises in Ukraine after privatization. To analyze this data, regression equations are estimated and explain the response of restructuring and performance indicators to ownership structures, competitive pressures, and hardening budget constraints. While ownership matters less for restructuring activity than competition and budget constraints, concentrated outside ownership does have a significant positive impact on the firm's performance. This research was financially supported by a grant from the International Association for Promotion of Cooperation with Scientists in the New Independent States of the Former Soviet Union (952-0280) and by a Research Fellowship provided by Konferenz der Deutschen Akademien der Wissenschaften, sponsored by Volkswagen Stiftung.     

China's explicit social security debt: How large?

Local governments in China have used a large amount of funds from individual accounts to finance deficits in the pay-as-you-go social pooling account, resulting in explicit social security debt. It is undoubtedly useful to know how large the debt is and how it will evolve in the future. This paper assesses the debt in China's social security individual accounts. It shows detailed calculations of the revenue, the anticipated funds, expenditures, and the debt in the individual accounts since their inception in 1997. The social security debt for China reached 1.59% of the GDP in 2015. The paper also assesses the historical social security debt in the individual accounts for each province. It shows that social security debt is unevenly spread, reaching more than 10% in Heilongjiang province and being negative in Guangdong province in 2015. The determinants for high debt in the individual accounts are examined based on the data from thirty-one Chinese provinces from 1997 to 2015. The paper also forecasts social security debt in the future and finds that the social security debt will reach over 8% of GDP in 2025 if the current system remains unchanged. Various ways to reduce the social security debt are also explored.     

Oil revenues for public investment in Africa: targeting urban or rural areas?

This paper investigates the effects of oil-financed public investment on economic growth and poverty reduction using a dynamic multi-sectoral general equilibrium model featuring inter-temporal productivity spillovers. The paper shows that the relationship between resource-rent flows and real exchange rates, output growth, and poverty is less straightforward than simple models of the “resource curse” suggest. Taking Ghana as a stylized agriculture-based economy with poverty most pronounced in a region with home based agricultural production, a policy mix of smoothing the real exchange rate shock and an allocation of infrastructure spending in rural areas seems to be the most promising public investment strategy to enhance growth and reduce poverty.     

Anti-corruption reform in indonesia: an obituary?

Indonesia's Anti-Corruption Court had until recently convicted all the defendants brought before it by the Corruption Eradication Commission. Many of these were well-known and politically powerful figures. Yet both the Court and the Commission are under threat. Between February and October 2011, the Anti-Corruption Courts issued more than 20 acquittals, and on 11 October 2011, for the first time, a defendant prosecuted by the KPK itself was acquitted. This article traces the history of the Court and the Commission and explains why their fall may be imminent. Both institutions have been the targets of efforts to discredit and hobble them, apparently orchestrated by people the Commission has investigated. If the current trend continues, the Anti-Corruption Court and the Corruption Eradication Commission may soon join the growing list of Indonesia's failed anti-corruption initiatives.     

Why privatize or why not? Empirical evidence from China's SOEs reform

Using a firm-level panel dataset which covers over 50,000 state-owned enterprises (SOEs) across China for the years 1998 to 2003, we attempt to answer the question of why some SOEs are privatized while others remain under state control. By applying a Heckman two-stage procedure, we investigate the causes that determine SOE privatization outcome. We find that the factors most conducive for privatization are the rise of competition, the increase of FDI concentration of both industries and provinces, and the hardening of SOEs' budget constraints. Moreover, it is shown that relatively better performing SOEs, measured by per employee value-added, profitability, and export propensity, are more prone to privatization. However, we should be careful in interpreting this result, due to the problem of selection bias. Results of the first-stage selection equation suggest that many small and non-performing SOEs dropped out of the sample, possibility due to privatization. What we can conclude is that, among the remainders, the better performing SOEs are more likely to be privatized.     

Interest rate compensation and debt: would a cap fit?

One group of proposals for alleviating debt problems endeavors to ameliorate the difficulties resulting from unanticipated increases in interest rates. Interest rate capping might, for example, involve setting up an Interest Rate Compensation Facility within the International Monetary Fund along the lines of the Fund's Compensatory Financing Facility. This article examines the logic of such institutional reform but also draws attention to a number of problems that would be involved.     

The land question in KwaZulu: Is land reform necessary?

Land reform in the ‘homelands’ depends on whether or not a viable economy can emerge in these areas. If not, the only alternative may be to accept the failure of rural development and follow the new state policy line of ‘positive urbanization’. Outside the limits of state policy, the apparent consensus on freehold tenure may be illusory. Black‐held priorities for land appear to differ at base from those held up by white groups. White business interests want to see large‐scale commercial farming, while blacks want the free and secure right to hold and deal in land, together with a right to use rural land for residential purposes.

There is renewed international interest in land reform. Some of the Far Eastern market economies have obtained startling rises in production under a reform regime of owner‐operated mini‐farms. It is doubtful if this type of reform is appropriate in KwaZulu, where the tenure system already strongly protects the universal right to hold land, and where the community's small role in land matters is still important to local self‐organization capacity. More appropriate models might be found in Zimbabwe and China, which have also achieved sharp rises in small‐farm production without full freehold tenure. Zimbabwe's village committee system recognizes existing land rights and allows for substantial local option. In China, decentralization policies seem to be encouraging a new rural economy in which most of the population may eventually be absorbed into self‐generated nonfarm activity. This kind of enterprise‐led rural development, may offer a possible pattern for KwaZulu.     

Health system reform in China: What role for private insurance?

The purpose of the present paper is to show that much of the literature on health economics and on the international experience with different forms of health system organization can be interpreted as supporting the idea that reliance on an unregulated market mechanism for organizing the production and financing of health services is likely to result in major problems both with respect to efficiency and equity. However, reliance on a centralized “command-and-control” model managed by government has also been shown to entail problems in practice. For this reason I argue that the best option at China's current state of development may be a compromise model in which competing private providers are given an important role, both for the production of health services and in the provision of health insurance, but in which the government intervenes (through regulation and direct provision) in such a way as to attain both a high degree of equity of access to health care, and to avoid the most significant forms of “market failure” that would arise in an unregulated private system.     

Pollution in a globalized world: Are debt transfers among countries a solution?

We analyze the effects of a debt relief, that is, a decrease in public debt of a low-income country financed by a high-income country, on environmental quality. Under perfect mobility of assets, the debt relief increases the overall capital stock, and environmental quality when public abatements are sufficiently efficient. Welfare in both countries can also improve. Under a weak mobility of assets, capital does no more increase in the richest country, but environmental quality can improve. This comes from a crowding-out effect of debt in the high-income country, which does no more take place when the mobility of assets is significant.     

Role of professionalism in response to the COVID-19 pandemic: Does a public health or medical background help?

In response to the outbreak of coronavirus disease 2019 (COVID-19), there have been substantial variations in policy response and performance for disease control and prevention within and across nations. It remains unclear to what extent these variations may be explained by bureaucrats' professionalism, as measured by their educational background or work experience in public health or medicine. To investigate the effects of officials' professionalism on their response to and performance in fighting the COVID-19 pandemic, we collect information from the résumés of government and Party officials in 294 Chinese cities, and integrate this information with other data sources, including weather conditions, city characteristics, COVID-19-related policy measures, and health outcomes. We show that, on average, cities whose top officials had public health or medical backgrounds (PHMBGs) had a significantly lower infection rate than cities whose top officials lacked such backgrounds. We test the mechanisms of these effects and find that cities whose officials had a PHMBG implemented community closure more rapidly than those lacked such backgrounds. Our findings highlight the importance of professionalism in combating the pandemic.     

A dilemma of Chinese healthcare reform: How to re-define government roles?

This paper discusses the government's roles in the healthcare sector in China. The paper begins with an introduction to the Chinese healthcare sector (supply and demand side) and to the current government's roles. It then reviews the recent transformation of the healthcare sector, with an emphasis on the change in the government's roles and the problems resulting from this transformation. The following is an examination of the latest healthcare reform policies and an exploration of pending government roles. Contrary to the opinion that problems existing in Chinese healthcare are primarily caused by market failure, this paper argues that the historically ambiguous and inappropriate roles of government in the provision of health care should be reexamined. This paper concludes that the most important issue facing the Chinese healthcare sector is finding the optimal balance between market and government.     

Bold Stock Recommendations: Informative or Worthless?

We select a small set of recommendations that lie in the upper and lower tail of the empirical distribution of divergences between a recommendation, and the consensus over the window (−30, −1) days prior to that recommendation. We classify these extremely divergent recommendations as bold, and then subdivide them into informative bold recommendations that lead other analysts (leading-bold) and those that are ignored by other analysts (contra-bold) based on the consensus change in the 30 days after the announcement. We focus on the information conveyed to the market by these bold, leading-bold, and contra-bold recommendations through their effects on cumulative abnormal returns (CAR). We find that bold recommendations are not anticipated by market participants (CARs are negative before a bold buy and positive before a bold sell). The next finding is that the market responds strongly to both leading and contra-bold recommendations over the (0, +4)-day window and that these reactions are stronger than that to nonbold recommendations. In contrast, over the longer (0, +30)-day window, leading-bold recommendations earn additional returns whereas contra-bold ones reverse significantly due to lack of confirmation. The overall pattern is one of rational market reaction both in the short and long windows. We support the rationality of the market reaction by showing that the percentage of leading-bold recommendations exceeds that of contra-bold recommendations, and that these two types of recommendations cannot be separated using observable analyst characteristics such as experience or brokerage size.     

China's Trade Slowdown: Cyclical or Structural?

This paper analyzes whether the slowdown of China's trade in 2012–2015 was cyclical or structural, and further discusses the effects of structural factors, including trade structure, trade protectionism and global value chain participation. Using the national panel data from 2000 to 2015, based on the error correction model and import‐intensity‐adjusted demand model, our results show that the slowdown of China's trade growth in 2012–2015 was mainly a result of cyclical factors. Using 2000–2015 industry‐level data, we also find that the structure of trade goods had an inhibitory effect on the import slowdown but a positive effect on the export slowdown. Trade protectionism had an adverse effect on the trade growth slowdown. The global value chain participation marginally contributed to the slowdown in trade growth. Therefore, the impacts of structural factors on trade growth slowdown cannot be ignored, and related policies should receive greater attention from policy‐makers.     

Selecting public goods institutions: Who likes to punish and reward?

We study the link between individual attitudes toward uncertainty on the one hand, and preferences over, as well as behavior within, various public goods institutions on the other hand. We incentive‐compatibly elicit preferences over voluntary contribution mechanisms with and without reward and punishment options and then randomly assign subjects to play in one of the four institutions. We find that payoffs are significantly greater when punishment is allowed but that only a small minority of participants prefers such an environment. Somewhat surprisingly, preferences over institutions are generally independent of individual characteristics. Conversely, individual characteristics, including institutional preferences, are significantly predictive of behavior in the public goods game. For instance, risk‐averse individuals preemptively punish more often. This suggests that when studying sanctions and rewards, it is important to consider individual attitudes toward risk and uncertainty—although they may not affect the original selection into institutions.