Revisiting the redistribution effects of intergovernmental fiscal transfers: evidence from Taiwan

This paper employs a panel of 23 local governments in Taiwan over 1998–2010 to re-estimate the redistribution effects of intergovernmental fiscal transfers by considering a self-financing resources of local government as the transition variable in panel smooth transition regression models. Empirical results show that the income (or tax revenues) redistribution effects of fiscal transfer policies are nonlinear and vary with time and across local governments. The grants from central government can improve income and tax revenues distribution of local governments; however, the centrally allotted tax revenues have inverse effects and the total fiscal transfers have ambiguous effects. The total fiscal transfer is a proper policy instrument for improving income redistribution, and the grants for improving tax revenues redistribution. However, high self-financing resources ratios are harmful for these redistribution effects.     

Fiscal decentralization and corporate investment: empirical evidence from China

This paper examines the effect of fiscal decentralization on levels and efficiency of corporate investment. The results indicate that as the extent of local government fiscal decentralization increases, the level of new investment by firms under their jurisdiction rises. Furthermore, fiscal decentralization has an impact on corporate investment by aggravating over-investment rather than alleviating under-investment, leading to a situation whereby fiscal decentralization is negatively associated with investment efficiency at the level of the firm. Finally, the impact of fiscal decentralization on over-investment, under-investment and investment efficiency is not different between state-owned enterprises and non-state-owned enterprises, suggesting that economic leverages are the dominant government intervention measures. The findings imply that fiscal decentralization is another determinant of firm-level investment and corporate investment efficiency, which broadens the existing literature on the economic consequence of fiscal decentralization, resulting in important implications for policy-making.     

Intergovernmental fiscal transfers and local tax efforts: evidence from provinces in China

This paper explores the incentive effects of total central fiscal transfers and its components – tax rebates and equalization grants – on provincial tax efforts in China. Our theoretical model predicts negative impacts on provincial tax efforts from both total fiscal transfers and equalization grants, while the effects of tax rebates are theoretically unclear. Using Chinese provincial panel data from 1995 to 2007, our empirical study provides significant evidence on the theoretical implications.     

Does delegation of fiscal policy to an independent agency make a difference? Evidence from intergovernmental transfers in India

One area of fiscal policy in which several countries have delegated responsibility to an independent agency is the distribution of national resource transfers across regional and local governments. Such delegation is expected to promote equity and efficiency, and mitigate distortions created by political incentives. This paper tests whether delegation to an independent agency indeed makes a difference by contrasting the impact of partisan politics on two types of fiscal transfers to states in the Indian federation over a period of time, 1972–1995. The pattern of evidence shows that, while the transfers that are determined by the central political executive are indeed distributed to favor particular states that are politically important for the central ruling party, the transfers that are delegated to an independent agency serve to constrain such partisan impact.     

The contribution of equalization transfers to fiscal adjustment: Empirical results for German municipalities and a US–German comparison

This paper considers the role of fiscal equalization in maintaining fiscal balance. It employs a large panel of German municipalities in order to investigate the dynamic fiscal policy adjustment using a vector-error–correction model that explicitly takes account of the intertemporal budget constraint. The results confirm that a substantial part of fiscal adjustment to revenue shocks takes place by offsetting changes in intergovernmental transfers: in present-value terms about 34 cents of a permanent 1 € decrease in own revenues are compensated by subsequent changes in fiscal-equalization transfers. Hence, the contribution of intergovernmental transfers in maintaining fiscal balance is found to be two to three times larger than in the case of US municipalities investigated by Buettner and Wildasin [Buettner, T., Wildasin, D.E., 2006. The dynamics of municipal fiscal adjustment. Journal of Public Economics 90, 1115–1132]. Despite fiscal equalization, however, expenditures are not found to display smaller fluctuations in the German case.     

Macroeconomic determinants of remittances: evidence from Romania

Given the globalization of the labour market and the promotion of free movement for work, young people are looking for employment opportunities from at least two perspectives – professional careers and socio-economic benefits from employment. In developing countries, such as Romania, the labour market is less attractive, which has led to profound, numerical and structural imbalances, due to external mobility for work. Both new generations of graduates and young people aged up to 40 years, decide to work abroad as a more beneficial individual solution, i.e. remittances. The purpose of this paper is to examine the macroeconomic determinants of remittances to Romania, in order to substantiate public policies on diaspora, to adjust employment policy on the national labour market by promoting incentives to create decent, youth-friendly jobs. Using panel data model we selected several variables with potential influence on remittances level. The results demonstrate that traditional influence’s factors as distance, migration routes diaspora concentration or unemployment rate are, at present, less important than wage gap or tax rate at least for developing origin countries.     

The effects of haze pollution on stock performances: evidence from China

Haze pollution has become the most important environmental issue in China in recent years. Using the data of PM_2.5 concentration and stocks of listed companies located in Beijing between 2010 and 2014, this article investigates the effects of haze pollution on stock performances. Empirical results indicate that haze pollution has significant negative effects on stock returns and significant positive effects on stock volatilities, through the channel of investors’ mood. Furthermore, the effects of haze pollution on stock returns emerge gradually and the effects of haze pollution on stock volatilities weaken gradually over time during a trading day.     

Municipal Finance in Poland,the Slovak Republic,the Czech Republic and Hungary: Institutional Framework and Recent Development

The recent process of political and economic transition in eastern European countries has not only contributed to the decentralisation of political structure but also significantly enhanced the fiscal autonomy of municipalities in these countries. In this context many similar types of public activities have recently been assigned to local governments, and some taxes were also declared to be local taxes. To be sure, this type of fiscal decentralisation has caused some additional problems, particularly for safeguarding the quality of publicly provided goods and services and for co-ordinating intergovernmental fiscal transfers between the central and local governments. For instance, some criticise that many small-sized municipalities in the transition economies have suffered from financial bottlenecks and have not been able to receive sufficient financial support from the central government. However, such a fiscal devolution trend appears to continue. This study primarily deals with issues surrounding the impact of national fiscal policy and the regulatory framework on local governments' expenditure behaviour and their ability to mobilise necessary revenues under the particular consideration of the institutional and administrative co-operation with the central government and of the less well-developed financial market in Poland, the Slovak Republic, the Czech Republic and Hungary.     

Non-linearity in the determinants of capital structure: evidence from UK firms

We demonstrate that, by exploiting more fully the distribution of leverage, conditional quantile regression methods yield new insights into the choice of leverage ratio. For UK listed companies we find that not only is the estimated effect of the explanatory variables different at different quantiles of the distribution, but also that the effect of a variable changes sign between low leveraged and high leveraged firms.      

The determinants of pollution levels: Firm-level evidence from Chinese manufacturing

Using a large, unique, firm-level dataset from the Chinese manufacturing sector, we study important factors that are related to emission intensity for three pollutants in China – sulfur dioxide, wastewater, and soot. Our main findings are as follows: (1) compared to state-owned enterprises (SOEs), both foreign-owned firms and domestic public-listed firms exhibit less intensive pollutant emissions; (2) firms in regions with less local protection have lower pollution intensity; (3) better property rights protection is negatively correlated with pollutant discharge over and beyond the national standards; and (4) larger firms, firms in industries that export more, and firms with more educated employees pollute less. These results suggest that China should not target foreign firms more harshly in its effort to reduce industrial pollution. Better institutions in the form of more effective law enforcement and lower entry barriers across regional markets are also means of curbing China’s pressing environmental problems during its current stage of economic development.     

Political economy of China’s trade policy: the evidence from industrial protection in 1990s

The theory of the political economy of trade policy, combining public choice and neoclassical trade theories, studies the level and pattern of trade intervention from the perspective of policy decision-making process, by stressing on income distribution instead of economic efficiency. The paper attempts to apply such an endogenous trade theory to an empirical study of China. On the basis of a formal revised model of political economy of trade protection, it tests theoretical hypotheses concerning the political and economic determinants of cross-sector trade protection in the Chinese industry at various periods. The results show that trade protection in China fits into China’s national development strategy of fast catching-up with the developed world.     

Monetary policy transmission mechanisms in Serbia: evidence from the fully-fledged inflation targeting regime

This article examines the effectiveness of monetary transmission mechanisms in the Serbian economy, covering the period from January 2009 (the point at which the formal switch to the fully-fledged inflation targeting regime was made) to December 2013. The results of the recursive VAR models suggest that the exchange rate and credit channels play a major role in the monetary transmission process, whereas this is not true in the case of the interest rate channel. However, the results of the non-recursive VAR models show that the role of the exchange rate has diminished over time. On the other hand, the credit channel has become much more influential. Thus, if one of the overriding objectives of adopting the explicit inflation targeting regime is to enhance the importance of other channels apart from the exchange rate channel, which could make monetary policy more effective in achieving price and financial stability, the switch to the inflation targeting regime is justified.     

Convertible bonds issued in the bear market period: evidence from Taiwan

We argue that the behaviour of enterprises might be modified or even changed completely after black swan events occur. We explore why high-tech firms preferred to issue convertible bonds in 2001–2003, the bear market period after the tech bubble in Taiwan. We show that firms issuing convertible bonds are those with low directors’ holding ratio and high debt ratio. Results also reveal that corporate governance was worse in the firms that issued convertible bonds, as revealed by the finding that the directors’ holding ratio of these issuing firms declined considerably. This finding also implies that corporate governance issues become more serious after black swan events.     

The dynamic effectiveness of monetary policy in China: evidence from a TVP-SV-FAVAR model

We use a broad set of China’s macroeconomic indicators and a dynamic factor model to estimate latent factors of economic output and inflation, which are used to measure the ultimate objectives of monetary policy. The above factors and policy variables are incorporated into a TVP-SV-FAVAR model to investigate the dynamic effectiveness of Chinese monetary policy. Our results confirm that the effects of Chinese monetary policy are time-varying. By comparing the quantity rule with the price rule, we find that the price rule is more effective in managing China’s macro-economy, especially after the financial crisis. Moreover, the results can be regarded as a division of policy rules in a way that different rules are directed at different objectives.     

Empirical study on the determinants of CO2 emissions: evidence from OECD countries

This article empirically investigates the Environmental Kuznets Curve (EKC) for CO₂ emissions in the cases of 11 OECD countries by taking into account the role of nuclear energy in electricity production. The autoregressive distributed lag approach to cointegration is employed as the estimation method. Our results indicate that energy consumption has a positive impact on CO₂ emissions in most countries in the study. However, the impact of trade is not statistically significant. The results provide evidence for the role of nuclear power in reducing CO₂ emissions only in some countries. Additionally, although the estimated long-run coefficients of income and its square satisfy the EKC hypothesis in Finland, Japan, Korea and Spain, only Finland's EKC turning point is inside the sample period of the study, providing poor evidence in support of the EKC hypothesis.     

The determinants of FDI location choice in China: a discrete-choice analysis

This study addresses two questions: What are the determinants of foreign direct investment (FDI) location choice in China? What are the factors that determine investors’ choice between ‘Economic zones’ in China on one hand, and ‘other cities’ of China on the other hand? This study shows that FDI location choice is sensitive both on the endowment conditions in different regions/cities/economic zones in China as well as on the country of origin of the FDI. Based on a data set of 1218 observations, the results of the binary logit regressions indicate that the protection of intellectual rights, agglomeration economies, investments in education and gross regional product affect the location choice of FDI in China. This choices, however, varies depending on the origin of the FDI. Policy makers can use these findings to channel FDI to targeted regions/ cities.     

Deregulation and the determinants of network access: evidence from the German interurban bus industry

We investigate the characteristics of cities gaining access to the German interurban bus network in the first two years following the deregulation of the industry in January 2013. Applying both parametric and semi-parametric survival models, we find strong evidence that the probability of a city to be added to a provider’s network increases not only with the mere size of its population but also with further demographic characteristics such as average income or the share of young and old inhabitants. Additionally, while an increasing importance of tourism has a further positive effect, a rising automobile density is imposing a significantly negative impact on the probability of a city to gain access to the network.     

Reform, Interaction of Policies, and Economic Growth: Evidence from China’s Provincial Panel Data

Based on provincial panel data, we tested the effects of openness, denationalization, fiscal reform, and their interactions on Chinese regional economic growth. We found the following: (1) Openness, especially the growth of foreign-direct-investment/gross-domestic-product ratio, has been important in enhancing China’s growth since the mid-1980s, while this effect is not so significant in western China. (2) Fiscal reform is another significant factor for economic growth. If local governments deregulate, higher growth will be obtained. In particular, reducing extrabudget expenditure helps push economic growth, especially in western China. (3) The interaction of economic policies, such as openness, denationalization, and fiscal reform, also plays an essential role in local economic growth. Both for the whole nation and for the eastern area, denationalization does not affect growth independently but expands the effects of deregulation. (4) After controlling economic policies and their interactions, conditional convergence exists. (5) With other factors controlled, eastern China achieved higher growth, while the middle and western areas did not differ significantly in growth. (6) Western China, where policy variables have lower explanatory power for growth, has a growth pattern different from those of the eastern and middle areas. Translated from the World Economic Papers, 2005, (1) (in Chinese)     

The effects of education in early-stage agriculture: some evidence from China

The stochastic production frontier approach is used to study the effects of education on agricultural efficiency for a cross-section of 'early-stage' farms from Guanghan County, Sichuan Province, China. Education for farm families in rural China is multifaceted with a combination of formal education, intragenerational transfer of knowledge within the home, and agricultural extension services. Since our survey data span two different years with markedly different policy environments, we are able to examine not only which aspects of education affect agricultural efficiency, but also whether or not the policy environment matters. We find limited evidence that in a policy environment that is conducive to agriculture, formal education provides positive returns in agriculture. Furthermore, general education may provide greater returns than the more targeted extension services.     

Dissertation abstract: Three essays on the determinants of behavior in the commons-experimental evidence from fishing communities in Colombia

This dissertation presents the results of a series of common pool experiments conducted in three regions of rural Colombia with individuals who face a social dilemma in their everyday lives that is similar to what was presented in the experiment. The research objectives are to develop an empirical characterization of how individual behavior deviates from purely self-interested Nash behavior and to further our understanding of the effects of alternative institutions to promote more conservative choices in common pool experiments.Groups of five subjects participated in a 20-period common pool resource game framed as a harvest decision from a fishery. Every group first played 10 rounds of a baseline limited access common pool resource game and then 10 additional rounds under one of five institutions: face-to-face communication, one of two external regulations, and communication combined with one of the two regulations. The two external regulations consisted of an individual harvest quota that was set at the efficient outcome, but differ with respect to the level of enforcement. A total of 420 individuals participated in the experiments, with individual earnings averaging slightly more than a day’s wages. The results are presented in three essays.The first essay, What Motivates Common Pool Resource Users?, develops and tests several models of pure Nash strategies of individuals who extract from a common pool resource when they are motivated by combinations of self-interest, altruism, reciprocity, inequity aversion or conformity. The results suggest that a model which balances self-interest with a strong preference for conformity best describes average strategies. The data are inconsistent with a model of pure self-interest, as well as models that combine self-interest with individual preferences for altruism, reciprocity and inequity aversion.The second essay, Communication and Regulation to Conserve Common Pool Resources, tests for interaction effects between formal regulations imposed on a community to conserve a local natural resource and non-binding verbal agreements to do the same. The results indicate that formal regulations and informal communication are mutually reinforcing in some instances, but this result is not robust across regions or regulations. Therefore, the hypothesis of a complementary relationship of formal and informal control of local natural resources cannot be supported in general; instead the effects are likely to be community-specific. There is some evidence to suggest that these effects are correlated with the relative importance of formal regulations versus informal community efforts in the community.The third essay, Within and Between Group Variation in Individual Strategies in Common Pools, analyzes the relative effects of groups and individuals within groups in explaining variation in individual harvest decisions for particular institutions, and uses a hierarchical linear model to examine how these sources of variation may vary across institutions. Communication serves to effectively coordinate individual strategies within groups, but these coordinated strategies vary considerably among groups. In contrast, externally-imposed regulatory schemes (as well as unregulated limited access) produce significant variation in the individual strategies within groups, but these strategies are roughly replicated across groups so that there is little between-group variation.