The impact of redistributive policies on inequality in OECD countries

Due to behavioural effects triggered by redistributional interventions, it is still an open question whether government policies are able to effectively reduce income inequality. We contribute to this research question by using different country-level data sources to study inequality trends in OECD countries since 1980. We first investigate the development of inequality over time before analysing the question of whether governments can effectively reduce inequality. Different identification strategies, using fixed effects and instrumental variables models, provide some evidence that governments are capable of reducing income inequality despite countervailing behavioural responses. The effect is stronger for social expenditure policies than for progressive taxation.     

The impact of fiscal policies on agricultural household decisions

This paper provides a comparative static analysis of farm household's production, consumption, and labor market decisions under alternative tax policies. We explore the implications of non-separable household decisions caused by widespread non-participation in labor, land, financial and/or food markets, as is typical of low income economies. The analytical results indicate that when labor market imperfections occur, most tax-induced responses are ambiguous, mainly due to shadow price effects. This is particularly the case for the labor market and production responses to most tax tools under study, while a decreasing demand for consumption goods appears to be the result in several cases. Furthermore, tax-induced allocation effects may differ between the non-separable and the separable model versions, indicating the potential impact of labor market constraints on farm household responses to tax policies. In particular, standard taxes as well as a land tax may imply production adjustments in the case of non-separability.     

The impact of the ECB's conventional and unconventional monetary policies on stock markets

Using an event study method, we examine how stock markets respond to the policies of the European Central Bank during 1999–2015. We use market prices of futures (government bonds) to identify surprises in (un)conventional monetary policy. Our results suggest that especially unconventional monetary policy surprises affect the EURO STOXX 50 index. We also find evidence for the credit channel, notably for unconventional monetary policy surprises. Our results also suggest that value and past loser stocks show a larger reaction to monetary policy surprises. These results are confirmed if identification of monetary policy surprises is based on the Rigobon–Sack heteroscedasticity approach.     

Trade adjustment policies and income distribution in three archetype developing economies

This paper explores quantitatively the macroeconomic and distributional impacts on non-oil producing, semi-industrial developing countries of external shocks originating in the world economy —in particular, rising costs of imports and shrinking export markets. The empirical analysis is done with a computable general equilibrium (CGE) model. The effects of the same external shock are modelled for three different archetype economies: a primary exporter, a manufacturing exporter, and a closed economy. Three different policy-adjustment regimes are considered: devaluation, premium rationing of imports (import licenses), and premium rationing in an environment with a fixed real wage for unskilled labor. By making simple assumptions about the way socioeconomic groups operate to influence decision-making, the paper also examines how the struggle between the gainers and losers is likely to affect the policy regime to be chosen.     

A structural VAR approach on labour taxation policies

This paper presents a Structural VAR analysis on the employment and output effects of labour tax policies in six European countries for the period 1974–1997. By considering impulse response functions, it turns out that, on average, a shock to the total personal income tax revenues is positively correlated to employment, whereas there is mixed evidence on the output effect. Moreover, the quantitative impact of these effects, especially those related to the output, appears to be quite small. However, by introducing explicitly four labour tax parameters (namely the marginal and average tax rates for the personal income tax and the payroll tax), it turns out that these effects are not negligible after all: for some countries it is possible to conceive labour taxes as policy instruments favouring more employment and a better economic performance. However, the empirical support on the sign of the output and employment effects is mixed, suggesting that the same domestic fiscal policy does not produce the same impact in all the European countries.     

Gender and forest conservation: The impact of women's participation in community forest governance

Would enhancing women's presence in community institutions of forest governance improve resource conservation and regeneration? This paper focuses on this little addressed question. Based on the author's primary data on communities managing their local forests in parts of India and Nepal, it statistically assesses whether the gender composition of a local forest management group affects forest conservation outcomes, after controlling for other characteristics of the management group, aspects of institutional functioning, forest and population characteristics, and related factors. It is found that groups with a high proportion of women in their executive committee (EC)—the principal decision-making body—show significantly greater improvements in forest condition in both regions. Moreover, groups with all-women ECs in the Nepal sample have better forest regeneration and canopy growth than other groups, despite receiving much smaller and more degraded forests. Older EC members, especially older women, also make a particular difference, as does employing a guard. The beneficial impact of women's presence on conservation outcomes is attributable especially to women's contributions to improved forest protection and rule compliance. More opportunity for women to use their knowledge of plant species and methods of product extraction, as well as greater cooperation among women, are also likely contributory factors.     

Variance-minimizing monetary policies with lagged price adjustment and rational expectations

This paper considers a macroeconomic model with rational expectations in which prices are incompletely flexible. Markets therefore fall to clear. In such a model monetary policy is not neutral. The variance of real and nominal quantities and interest rates is sensitive to the parameters of the feedback rule that determines the money supply. The monetary policy that achieves the goal of minimizing the steady-state variance of real output is characterized. We also examine monetary policies that are restricted in their generality and derive ‘second-best’ variance-minimizing feedback rules.     

The impact of macroprudential policies on the transmission of shocks across financially integrated countries

We study the implications of macroprudential policies across countries on the transmission of shocks when international investment activities are allowed. In a two-country dynamic stochastic general equilibrium (DSGE) model in which international investors are borrowing constrained and pledge international assets, we introduce a time-varying loan-to-value (LTV) ratio that adjusts to the variation of three different financial vulnerability indicators. We examine the effect of these policies on negative productivity and borrowing capacity shocks. Although time-varying LTV ratios reduce the international propagation of the productivity shock, their response to the shock depends on the financial vulnerability indicator with which the LTV ratio changes. With a productivity shock, the adjustment of the LTV ratio to the deviation of credit or asset price helps to reverse the negative impact of the shock. With a financial shock, LTV ratios varying with a deviation of credit-to-GDP ratio or aggregate credit can mitigate the impact of a negative financial shock. Adjustment of the LTV ratios reduces the fluctuation of international investors' balance sheets, investment, and productivity. We find that countries improve their welfare when time-varying LTV ratios are in place. The magnitude of the welfare gain differs with both the financial vulnerability indicator and the shock.     

Sovereign debt, structural adjustment, and conditionality

The lack of a proper enforcement mechanism for sovereign debt generates a commitment failure. As a result, a sovereign may seek to improve its position in debt renegotiations and thus evade its debt obligations by reducing exports. Conditionality seeks to provide a solution to the incentive problem by addressing the commitment failure. Formalizing this argument, we show that conditionality helps the repayment of sovereign debt. In certain circumstances, it can eliminate debt overhang, especially when it is coupled with concessionary lending of sufficient magnitude. It is, however, unable to restore first best. When it is anticipated by lenders, conditionality may get international financial institutions and sovereign debtors into a trap where the debt overhang persist, debt rescheduling takes place periodically, and conditionality continues indefinitely.     

The impact of decentralization and inter-territorial interactions on Spanish health expenditure

This paper examines the determinants of regional public health expenditure in a decentralised health system. Unlike previous studies we take into account possible policy and political interactions among authorities, as well as unobserved heterogeneity. Our emprirical contribution lies in running a spatial panel specification using a dataset of all Spanish region states on aggregated and disaggregated health expenditures (pharmaceuticals, inpatient and primary care). Results are consistent with some degree of interdependence between neighboring regions in spending decisions. Empirical evidence of long term efficiency effects of health care decentralisation, suggests that a specific spatial-institutional design might improve the health system efficiency as well as regional cohesion. Political and scale effects are consistent with theoretical predictions.     

The impact of universal child benefits on family health and behaviours

In 2006, the Universal Child Care Benefit was introduced in Canada for all children aged less than 6 years. This program aims to help cover the cost of children and to provide financial assistance to families with young children in their choice of childcare. We exploit this policy change to estimate the effects of unconditional family cash transfers on the health and behaviours of two-parent families and their children. Using a difference-in-differences model, we find no evidence that the program improved child and parental outcomes in aggregate. A modest but fragile beneficial effect is found for low-education families and for girls.     

Mother's autonomy: impact on the quality of children's healthcare in India

Given the poor condition of children's health in developing countries, this article seeks to examine two hypotheses concerning healthcare for children. First, does mother's autonomy influence the quality of child healthcare and, second, which is related to the first, whether mother's autonomy reduces the apparent gender bias in child healthcare. Using household survey data from Bihar and Uttar Pradesh in India the article finds that for the most part as the mother's autonomy (measured several different ways) increases, the quality of care for children improves. The results also indicate that gender bias exists in the provision of quality healthcare for children. Male children generally receive better quality care. However, for several measures of female autonomy, an increase in such autonomy reduces the bias. The results of this analysis have important policy implications and provide additional insight into the state of affairs of children's health in rural India.     

The impact of financial liberalization on capital structure adjustment in Pakistan: a doubly censored modelling

The purpose of the study is to explain adjustment rate towards target capital structure of Pakistani nonfinancial listed firms and to investigate the impact of financial liberalization (FL) on capital structure adjustment rate. We control for the unobserved heterogeneity and the fractional nature of adjustment rate by applying an unbiased dynamic panel fractional estimator on an unbalanced panel data of Pakistani nonfinancial firms listed during 1972–2010. We find that these firms adjust at an annual rate of 24–51% to reach their capital structure targets. We argue that in order to optimize the benefits of FL the government should strengthen financial as well as judicial institutions to enforce the creditors’ rights that will enable access to more options to Pakistani firms to raise cheaper external financing.     

Mean adjustment and the CUSUM test for structural change

We show that the common practice of mean adjusting the data prior to regression and testing has serious implications for the null distribution of the CUSUM test for structural change.