Participatory budgeting and the pattern of local government spending: Evidence from South Korea

We use a panel of Korean municipalities to examine the impact of participatory budgeting on local government expenditures. We find that participatory budgeting systematically alters the pattern of local spending. Municipalities using participatory budgeting reallocate resources toward more immediate and visible expenditures and away from long-term development expenditure. We also find evidence that participatory budgeting affects the municipal budget by a greater amount than the expenditures directly allocated through participatory budgeting. Our findings indicate that participatory budgeting leads to the reallocation of local public spending by increasing information flows between policymakers and service users.     

Political accountability and public service delivery in decentralized Indonesia: Incumbency advantage and the performance of second term mayors

To what extent do voters hold local elected leaders accountable for public service delivery in fiscally and politically decentralized environments, as theory suggests should be the case? We examine political accountability and service delivery in subnational Indonesia, through the lens of mayoral incumbency advantage. We apply regression discontinuity methods to a unique data set on local elections to identify the causal impact of incumbency on election outcomes and relate those effects to changes in citizen access to local public services. We find that voters in Indonesia are, in general, very willing to return incumbents to office compared to their counterparts in other countries. We also determine that the incumbent advantage is conditional on advances in local service provision: as service access expands more quickly, voters are more likely to vote incumbents back into office. Finally, we find that electorally successful incumbents—second term mayors—spend substantially less on education and health and more on infrastructure, manage their budgets less prudently, and deliver public services neither more nor less effectively than their first term equivalents. We conjecture that term limits and the attendant lack of electoral incentives leads to the disappointing second-term mayor performance.     

Gender quotas and the selection of local politicians: Evidence from French municipal elections

Using data on the universe of elected politicians in French municipalities, this paper studies the impact of a gender quota law on the political representation of women and on the composition of municipal councils. The empirical strategy, a Difference-in-Discontinuities design, takes advantage of the fact that the policy applies to cities above a population threshold, and that this threshold has been modified over time. I find that the quota policy has a substantial impact on the share of female candidates and elected politicians, but fails to promote female mayors and list leaders, even in cities that have been exposed to the policy for 13 years. Women do not reach leadership positions because they are more likely to resign than male politicians. This higher propensity of women to leave politics is correlated with local gender norms concerning the place of women in society, and also varies with individual characteristics such as age and professional background. In a second part, I show that quotas have little effect on the composition of municipal councils in terms of socio-economic background, age, and political experience.     

The effects of government spending shocks on the real exchange rate and trade balance in Turkey

The aim of this study is to investigate the effects of government spending shocks on the real exchange rate and foreign trade balance in Turkey for the period of 2002:01–2012:04 within a structural VAR framework. The analysis shows that a positive shock to the government spending tends to induce real exchange rate appreciation and deterioration in trade balance. We also find that the composition of the government spending matters. Although shocks to the government nonwage consumption generate an appreciation in the real exchange rate and worsening of the trade balance, the effects of government investment shocks remain insignificant. Furthermore, the analysis demonstrates that shocks to government spending are associated with a rise in taxes, which is indicative of a spending-driven tax adjustment process in Turkey.     

Effects of government spending shocks in China,Japan, and Korea

ABSTRACT

This study investigates the effects of government spending shocks on various key macro variables in China, Korea, and Japan using structural VAR models. The main empirical findings are as follows. Government spending multipliers of all three countries are far larger than 1 in recent years. The effectiveness of fiscal expansion has not changed markedly in China but substantially increased in Korea (after the Asian financial crisis) and Japan (during zero lower bound period). Increases in the effectiveness of fiscal expansion are associated with changes in the monetary and exchange rate policy regimes and institutions of these countries. Among the three countries, the government spending multiplier is relatively large in China but relatively small in Japan in recent years. Although the effects on exchange rate and trade balance vary across countries and sample periods, real exchange rate tends to depreciate, whereas trade balance tends to improve under flexible exchange rate regimes. Some empirical findings are consistent with standard theory, but others are not.

Abbreviations: NK: New Keynesian VAR: Vector Autoregressive ZLB: Zero Lower Bound     

The political economy triangle of government spending,interest-group influence,and income inequality: Evidence and implications from the US states

This paper introduces the political economy triangle (PET) concept of government spending, special interest groups (SIGs) influence, and income inequality, empirically confirming its existence and unveiling its nature while directly addressing key shortcomings of most prior research on the determinants of such inequality. Using static and dynamic panel techniques and data from the US states, it reports several new results: (i) the findings of previous studies regarding the roles of government spending and interest groups, including labor unions, in income distribution are confirmed, however, their estimated inequality effects grossly underestimate those obtained when endogeneity issues are accounted for explicitly; (ii) a dynamic tripartite relationship between the variables of the PET exists; (iii) government spending and SIGs' influence, including union strength, beyond their direct effects on inequality, have a separate positive impact through their interactions; (iv) the effectiveness of government spending in reducing inequality diminishes as the level of SIGs' influence and union strength increase in the short and long run, (v) the aggregate inequality-increasing effect of SIGs is strengthened and the inequality-reducing effects of unions weakened as the spending rises, in the short run and long run. Finally, the broad implications of these findings are discussed.     

The effectiveness of government spending on education and health care in developing and transition economies

Recent studies show that corruption is associated with higher military spending [Eur. J. Polit. Econ. 17 (2001) 794] and lower government spending on education and health care [J. Publ. Econ. 69 (1998) 263]. This suggests that policies aimed at reducing corruption may lead to changes in the composition of government outlays toward more productive spending. However, little empirical evidence has been presented to support the claim that public spending improves education and health indicators in developing and transition countries. This paper uses cross-sectional data for 50 such countries to show that increased public expenditure on education and health care is associated with improvements in both access to and attainment in schools, and reduces mortality rates for infants and children. The education regressions are robust to different specifications, but the relationship between health care spending and mortality rates is weaker.     

The effects of local government investment on economic growth and employment: evidence from transitional China

Based on the panel data of 28 provinces in the year of 1987-2001,this paper examines the effects of the local government investment on economic growth and employment.The empirical result shows that the local government investment plays a significant positive role in economic growth and emplovment.However,while the proportion of local government investment to GDP had a remarkable rise after 1998.the elasticity of local government investment on economic growth declined,which shows that there is a hig room for raising the efficiency of local government mvestment.Moreover,the empirical examination shows that although local government investment had positive effect on employment,the elasticity had a decrease after 1994 when the tax-sharing system reform was put into practice.This shows that the positive role of local government investment on emplovment is also limited.This paper argues that the role of local governments as investors must be weakened,and local governments of different levels should lessen direct economic intervention and concentrate on public regulation.     

The effect of public financing on candidate reemergence and success in elections

In this paper, I estimate the causal effect of public funding of elections on candidates' reemergence and success using a regression discontinuity design in the context of South Korean municipal legislative elections. I find that public financing has no overall effect on candidate reemergence and success in a subsequent election. I do find, however, that campaign expense reimbursement has a positive effect on those who are formerly underrepresented in politics, especially women, in whose case it increases the probability of running again by 24.6 percentage points and that of winning the next election by 10.1 percentage points. I also find some suggestive evidence that campaign expense reimbursement can help female candidates become career politicians.     

Transfer payments from the central government to the local gov- ~ i in ernments and the local governments efforts on taxation,taking China as an example

The influence of the transfer payments from the central government to the local governments on the local governments＇ efforts on taxation must be taken into consideration by every country for the design of the transfer payments. Based on the theoretical analysis on the influence of the transfer payments from the central government to the local governments＇ on the local governments＇ payments＇, this paper indicates that the local governments＇ efforts on taxation depends on the demand elasticity of the district for public goods, It increases with the increase of the elasticity. Judge the degree of the local govet：nment＇s efforts on taxation by measure 2. After an empirical analysis on the transJer payments from the central government to the local governments＇from 2000 to 2004, this paper gets the con- clusion that the local governments＇ effbrts on taxation ctbates with the increase of supporting payments or with the increase of the ratio of transfer payments to local wiliing public paymentS. Under speCific Circumstances, the higher the ratio of transfer payments to the local fiscal expenditure is. the smaller the local governments＇ efforts＇ on taxation is＂ under the central payments, whereas＇ the higher the local income is, the higher the efforts is under the central pav- ments. Based on this＇, this paper gives the meaning of its eOrresponding pofiCieS. ＂     

The impact of fiscal-monetary policy interactions on government size and macroeconomic performance

This paper analyzes the relationship between inflation, output and government size by reexamining the time inconsistency of optimal monetary and fiscal policies in a general equilibrium model with staggered timing structure for the acquisition of nominal money à la Neiss (Neiss, Katharine S. (1999), Discretionary Inflation in a General Equilibrium Model, Journal of Money, Credit and Banking, 31(3), pp. 357–374.), and public expenditure financed by means of a distortive tax. It is shown that, with predetermined wages, the equilibrium rate of inflation is above the Friedman rule and the equilibrium tax rate is below the efficient level. In particular, the discretionary rate of inflation is nonmonotonically related to the natural output, positively related to government size, and negatively related to the degree of central bank conservatism. Finally, a regime with commitment leads to welfare improvements over a regime with discretion.     

Grants-in-aid and election outcomes in recipient jurisdictions: The impact of EU funds on mayoral elections in Poland

We analyze the impact of EU funds on the outcomes of Polish mayoral elections in 2010 and 2014. We employ an instrumental variable approach to account for the endogeneity of EU funds. Our instruments approximate the availability of EU funds. The first instrument builds on the alignment of the local electorate with the regional donor government. The second instrument uses the funds spent in municipalities in the same sub-region dropped from the sample because the mayors do not run again. We do not find convincing empirical evidence in favor of the notion that EU funds increase the vote shares of mayors. We go on to test whether the electoral effect of EU funds is conditional on the attitude towards the donor institution among the population in the recipient population. This conditional factor is under-researched and politically virulent – given citizens’ skepticism towards the EU that Krastev (2017) describes for Central and Eastern European EU members. Our results are affirmative. EU funds increase the vote shares of mayors in municipalities where Krastev (2017) predicts the degree of EU skepticism to be low while they are not found to do so in municipalities where EU skepticism is predicted to be widespread. These results suggest that citizens’ attitudes towards the donor of vertical grants determine the political gains of recipients from using them.     

The impact of FDI on host countries: the analysis of selected service industries in the Visegrad countries

Foreign direct investments are substantial in the services sector in the Visegrad countries. In this article, we analyse the impact of FDI on the host economy in four selected service industries in two areas: export and employment. FDI in the four selected service industries differ in terms of their vertical or horizontal nature: in business services FDI is predominantly vertical; in financial services and telecommunications it is predominantly horizontal; while in computer-related service activities both types can be found. According to our results, the impact on the host economy differs in the four service industries. We found a positive and significant impact on exports in vertical business services and in horizontal telecommunications services, and on employment in business services and, to a lesser extent, in financial services. The positive impact either diminished or disappeared during the global recession of 2008–2009. The comparison of the four Visegrad countries demonstrates the heterogeneous intensity and significance of this impact, indicating their different specialisations in the analysed services industries.