Government reactions to private substitutes for public goods: Remittances and the crowding-out of public finance

Migrant remittances have been praised as an important source of capital for development. However, one aspect that has been relatively neglected so far is: How do governments respond to the inflow of remittances? This research claims that remittances crowd out public finance, because governments enjoy higher approval rates in the presence of remittances without the need to buy electoral support and face lower pressure for increasing public spending when private substitutes exist. Empirical evidence for this hypothesis is provided from subnational public finances in Mexico, using exogenous variation in migrants’ exposure to U.S. labor market conditions as an instrument for remittances. The panel analysis of trends in municipal budgets reveals that state governments responded to the inflow of resources by allocating funds away from municipalities with a stronger presence of remittances. This is true for private remittances as well as for collective remittances, i.e. cases in which migrants and public actors jointly finance public spending via matching grant schemes. The effect is driven by poorer municipalities and is stronger in states governed by the traditional party PRI that has been associated with a long history of clientelistic rule.     

Fiscal consolidations and electoral outcomes in emerging economies: Does the policy mix matter? Macro and micro level evidence from Latin America

Do voters punish governments that introduce fiscal “austerity” measures? If so, does voter response vary according to the composition of fiscal adjustments? The empirical literature on the political economy of fiscal adjustments, which is mostly OECD-based, argues that consolidations do not have significant electoral consequences. In contrast, we find that voters punish fiscal consolidations at the polls in Latin America. To explain this result, we focus on the way fiscal adjustments episodes are implemented, both in terms of their design (taxes vs. spending) and timing. Such episodes rely fundamentally on increasing tax rates and bases of indirect taxes (such as the VAT) that hit broad segments of the population. Moreover, these policies are often implemented when politicians have no choice but to consolidate, that is, under severe economic circumstances. These macro results are corroborated with micro evidence from an original survey experiment that measures voter’s fiscal policy preferences over the business cycle in seven countries across Latin America. The experimental evidence shows that respondents prefer expenditure cuts to tax increases during downturns, which is the opposite of the type of consolidations that countries typically pursue.     

Political cycles in public expenditure: butter vs guns

This paper explores, theoretically and empirically, how governments may use the tradeoff between social and military expenditure to advance their electoral and partisan objectives. Three key results emerge. First, governments tend to bias outlays towards social expenditure and away from military expenditure at election times. Second, the size of this tradeoff is larger when we exclude countries involved in conflict, where national security plays an important role on voter choice. Third, while certain categories of social expenditure are higher during left administrations, military expenditure is higher during right administrations.     

财政支出分权如何影响政府支出预算偏离*

政府支出决算与预算的差异可称之为支出预算偏离，其大小直接关系到现代预算制度的建设和积极财政政策提质增效的效果。预算最大化理论指出地方政府追求自由裁量预算的最大化，这会导致预算支出大于决算支出，而财政支出分权则便利了地方政府追求自由裁量预算最大化的条件，因此，财政支出分权是导致支出预算偏离的一个重要因素。利用1994—2017年全省层面和市县加总层面的财政预决算数据，本文发现，财政支出分权程度越高，政府支出预算偏离的程度也越大。不同形式的稳健性检验较好地支持了上述结论。此外，经济发展水平和财政透明度能够降低财政支出分权对预算偏离影响的程度。合理调整不同层级政府之间的事权，建立事权与支出责任相匹配的财政体制，适度加强中央事权和支出责任，将有效降低政府支出预算偏离的程度。     

财政支出分权如何影响政府支出预算偏离*

政府支出决算与预算的差异可称之为支出预算偏离，其大小直接关系到现代预算制度的建设和积极财政政策提质增效的效果。预算最大化理论指出地方政府追求自由裁量预算的最大化，这会导致预算支出大于决算支出，而财政支出分权则便利了地方政府追求自由裁量预算最大化的条件，因此，财政支出分权是导致支出预算偏离的一个重要因素。利用1994—2017年全省层面和市县加总层面的财政预决算数据，本文发现，财政支出分权程度越高，政府支出预算偏离的程度也越大。不同形式的稳健性检验较好地支持了上述结论。此外，经济发展水平和财政透明度能够降低财政支出分权对预算偏离影响的程度。合理调整不同层级政府之间的事权，建立事权与支出责任相匹配的财政体制，适度加强中央事权和支出责任，将有效降低政府支出预算偏离的程度。     

Testing the taxmimicking versus expenditure spill-over hypotheses using English data

Spatial interaction among local governments in tax setting and public spending decisions is receiving increasing attention in the applied public economics literature. Spatial interaction models rely on the presence of an externality from local budget making: in traditional public finance models, external effects originate either from interjurisdictional resource flows due to tax competition for a mobile base, or from local public expenditure spill-overs into neighbouring jurisdictions. However, the recent political agency/yardstick competition literature has stressed the role of ‘informational’ externalities between neighbouring jurisdictions, and predicted tax mimicry at the local level. The actual relevance of the above hypotheses clearly needs to be assessed empirically. In this paper, an attempt is made at discriminating between alternative sources of local fiscal interaction, by using data on the English municipal authorities' budgets. While both public spending levels and local property tax rates exhibit considerable positive spatial autocorrelation, maximum likelihood and instrumental variables estimation results suggest that the interdependence among local governments can be attributed to mimicking behaviour in local property tax setting.     

Public Expenditures on Education and Cultural Affairs in the West German States: Does Government Ideology Influence the Budget Composition?

Abstract. This paper examines whether government ideology influenced the allocation of public expenditures on education and cultural affairs in the West German states in the 1974–2006 period. I explicitly consider the allocation of policy responsibilities between the federal and the states' governments. The results suggest that leftist governments slightly increased public spending for schooling, whereas rightwing governments spent somewhat more on universities and cultural affairs. This spending pattern appears to be in line with the preferences of the governing parties' constituencies and indicates political competition in a time of declining electoral cohesion.     

“When it rains,it pours”: Fiscal policy,credit constraints and business cycles in emerging and developed economies

Fiscal procyclicality, meaning co-movement between government expenditure and macroeconomic fundamentals, is an important feature of business cycle dynamics for emerging and poor economies. I estimate a panel SVAR to investigate the reasons for fiscal procyclicality. The analysis sheds light on the role of external financial constraints in shaping fiscal policy. My findings suggest that the response of emerging governments to output fluctuations is similar to that of developed governments. However, emerging governments curtail spending in response to increases in the sovereign borrowing rate, which forces their consumption expenditure to act more procyclically. Using counterfactual analysis, I show that the key forces behind fiscal procyclicality are the sensitivity of government spending to international borrowing costs and the procyclical nature of these costs for emerging economies.     

Partisan influence on social spending under market integration,fiscal pressure and institutional change

In this paper we examine whether partisan influence on social expenditure in the OECD has decreased over the past three decades. We analyze whether a reduced partisan influence is due to more trade openness, larger budget deficits or the creation of new supranational institutions. Our empirical approach distinguishes between the effects on the long-run growth of social expenditures and its short-run adjustment to violations of the long-run equilibrium linking social spending with macroeconomic and demographic trends. We find that partisan motives, indeed, play an important role in the explanation of short-run dynamics in social spending. Left-wing parties are found to spend significantly more than their right-wing counterparts and parties spend more before elections. However, the partisan influence has changed over time. While ideology has lost some of its influence, the electoral cycle has become more important to explain changes in social expenditure. This result should be addressed to a general institutional change that took place in the early 1990s and continued over that decade. While changes in trade openness, indebtedness and budget deficits have not changed the partisan influence on social spending, they are particularly important to explain the short-run dynamics of social spending.     

Optimal annexation

Previous empirical studies of the effects of annexation on municipal expenditures and municipal efficiency have yielded mixed results. Here it is argued that as municipalities grow through annexation, there may be administrative and service delivery efficiencies that, at least for a time, more than offset the inefficiencies of a heightened degree of monopoly power in the provision of infrastructure and services. If this is the case, then the rates of growth of both per capita taxes and per capita spending will decrease with annexation. Eventually, though, administrative and service inefficiencies are likely to develop as the city's geographic area and population base increase, and monopoly inefficiencies are likely to worsen. If this is the case, then the rates of growth of both per capita taxes and per capita spending will increase with annexation. Thus, there may be some level of annexation activity at which the growth of per capita taxes and the growth of per capita spending will be minimized. Municipal annexation, taxation, and expenditure outcomes from the 1970s are analysed in an empirical framework that reflects the interactions among these variables in dynamic municipal settings. The results are consistent with the existence of an optimal level of annexation.     

The Effects of Fiscal Consolidation and Welfare Composition of Spending on Electoral Outcomes: Evidence from US Gubernatorial Elections between 1978 and 2006

This study attempts to make a contribution to the field of spending aspects of fiscal policy and their impacts on electoral outcome. Due to varying degrees of financial responsibilities and commitments to provide public goods and services, US state governments serve as a perfectly natural laboratory to test the electoral significance of fiscal policies. We adopt a probit model, with several specifications, to determine significant impacts of fiscal consolidation and increases in welfare spending on US gubernatorial elections from 1978 to 2006. The analyses show that voters are more concerned about the increase in debt than current budget deficits. An increase in welfare spending is negatively associated with reelection. Moreover, the impact of taxation on gubernatorial elections turns out to be insignificant. In particular, findings suggest that the political business cycle model does not hold true in US gubernatorial elections. Expansionary fiscal policy right before the election may not have crucial impacts on the chances of an incumbent winning the election.     

Does fiscal decentralization affect local governments' strategic behaviours? Evidence from South Korea

Local governments tend to show strategic behaviours when making their spending decisions. However, few studies have examined strategic behaviours when promoting fiscal decentralization. Thus, this study empirically examines the presence of strategic interactions in expenditure decisions in South Korea as well as how fiscal decentralization affects those interactions, using a panel data set from 2010 to 2017. The results demonstrate that a local government mimics other governments' spending when those governments' residents share similar age demographics. Moreover, local governments in South Korea engage in strategic interactions as their expenditure side becomes more decentralized. However, local governments tend to demonstrate less isomorphic behaviour in welfare spending decisions when they have higher revenue decentralization. This is because local governments have no motive to emulate other welfare policies, as the central government delegates the provision of social services to local governments by providing grants with strings attached.     

Better to be direct? Evidence from the abolition of direct elections in Italian local governments

This paper provides evidence for the importance of direct electoral processes by investigating the consequences for public spending of an unexpected reform that repealed direct elections for local (provincial) politicians in Italy. Direct elections were substituted with indirect ones, whereby directly elected municipal politicians choose a municipal mayor to serve as provincial president. Using a difference-in-differences strategy, I document two main consequences of the reform. First, municipalities connected to the provincial presidents tend to receive disproportionately more public funds after the reform, suggesting geographic favoritism increased. Second, the share of provincial resources spent on public goods drops in favor of bureaucratic costs. I discuss suggestive evidence that these results are driven by weaker electoral incentives rather than by the selection of worse politicians.     

Party Control of State Government and the Distribution of Public Expenditures*

This paper examines the effects of party control of state governments on the distribution of intergovernmental transfers across counties from 1957 to 1997. We find that the governing parties skew the distribution of funds in favor of areas that provide them with the strongest electoral support. This is borne out in two ways. (i) Counties that traditionally give the highest vote share to the governing party receive larger shares of state transfers to local governments. (ii) When control of the state government changes, the distribution of funds shifts in the direction of the new governing party. We find only weak evidence that parties reward electorally pivotal counties or counties in electorally pivotal legislative districts. Finally, we find that increased spending in a county increases voter turnout in subsequent elections. This suggests that parties have an electoral incentive to skew the distribution of funds to influence future election results, and the mechanism through which this works is “mobilization” rather than “conversion” of voters in a fixed electorate.     

财政分权下地方政府卫生支出的竞争行为研究

分权体制框架下地级市政府在制定医疗卫生支出决策时往往会受到相邻城市相关策略的影响,从而引发城市间政府卫生支出的策略互动行为.文章选取了2007?2013年中国283个城市面板数据,运用动态空间面板模型检验了分权体制下地市级政府卫生支出的策略互动行为,并揭示出财政分权及其城市间空间策略互动对政府卫生支出的影响.研究发现,地市级政府在政府卫生支出上存在显著的互补型策略互动,这种效应在地理距离相近的同省区城市间更为显著.进一步分析发现,财政分权促进了政府卫生服务供给;而无论是短期还是长期,地市级政府间财政分权的策略互动对政府卫生支出产生明显的抑制作用,从而较好地解释了政府卫生支出比重徘徊不前的原因.由此,积极利用竞争、激励机制以及实现财政体制安排的优化变革来引导政府的卫生服务供给将是重要的政策选择.     

Population Ageing and Social Expenditure in Australia

Projections of the social expenditure to GDP ratio indicate the extent of the ‘burden’ of population ageing on future workers and have been used by governments to aid policy decisions in such areas as immigration and superannuation. This article shows that the social expenditure to GDP ratio is heavily dependent on assumptions made about real spending growth, productivity growth, unemployment and participation rates. It produces a framework that makes the assumptions underlying the projections clear and enables the results of changing the assumptions to be easily compared. The projected ratios are significantly higher than those obtained in previous Australian studies.     

Coattails and the forces that drive them: Evidence from Mexico

Coattails and the forces behind them have important implications for the understanding of electoral processes and their outcomes. By focusing our attention on neighboring electoral sections that face the same local congressional election, but different municipal elections, and assuming that political preferences for local legislative candidates remain constant across neighboring electoral sections, we exploit variation in the strength of the municipal candidates in each of these electoral sections to estimate coattails from municipal to local congressional elections in Mexico. A one percentage increase in vote share for a municipal candidate translates, depending on his or her party, into an average of between 0.45 and 0.78 percentage point increase in vote share for the legislative candidates from the same party (though this effect may not have been sufficient to affect an outcome in any electoral district in our sample). In addition, we find that a large fraction of the effect is driven by individuals switching their vote decision in the legislative election, rather than by an increase in turnout.     

公共支出结构对收入不均等影响研究——基于公共服务均等化视角分析

收入不均等影响到社会公平与经济发展,而收入公平分配是政府的主要责任,也是政府公共支出的依据之一.影响收入分配不均等的因素有很多,其中由于政府相应责任缺位,公共支出结构偏向,使得公共支出中基本公共服务支出不足是其主要原因.本文实证分析得出公共支出总量与结构严重影响基本公共服务供给,进而影响着收入不均等的水平,成为社会公平和稳定的重要因素.政府应从制度上进行公共支出改革,规范督促地方政府优化公共支出结构,不断提高对民生支出的主动性,逐步缩小基本公共服务的差距,缩小收入不均等的水平.     

The time profile of public expenditure growth in India: An emprical investigation

Empirical tests confirm that the major social upheavals produced interfunctional and intrafunctional ‘displacements’ in government spending and thereby changed the character of public expenditure in India. There was a strong resurgence in the growth of public expenditure on social and development services; the State governments gained a greater role in this area in the post-disturbance period. Perhaps this could be inferred as a disturbance-generated ‘decentralization process’ giving a greater scope for the State governments in dealing with social and development services.     

政府公共卫生支出行为影响因素的实证分析

公共卫生支出属于财政支出的重要组成部分。随着我国公共财政体制的建立,合理界定公共卫生支出占财政支出的比重显得尤为重要。本文使用31省、直辖市、自治区2000—2010年的面板数据,实证分析了我国地方政府公共卫生支出的影响因素。研究表明,人口规模、人口结构、城市化程度与政府公共卫生支出并没有必然的因果关系;经济发展水平和政府机构及人员的膨胀程度与政府公共卫生支出之间存在着正相关关系;财政分权也只是对公共卫生支出产生很小的正面影响。