Government spending under non-separability: a theoretical analysis

We derive analytic implicit form conditions for the qualitative analysis of government spending multipliers and the optimal level of government spending in presence of non-separability between private and public components of aggregate demand. Using the simplest neo-classical flexible price model with no capital accumulation, we show that Edgeworth dependence is not a suitable condition to automatically assess the signs of the consumption and output multipliers, for which a more complex analysis must be carried out. We propose a detailed investigation of the form and the characteristics of the involved utility functions, which are crucial to such evaluation. We also show that if Edgeworth complementarity is strong enough, a public spending stimulus can raise at the same time private consumption and real activity. In order to reconcile our general framework with existing literature, we discuss recent examples of non-separable functional forms from the standpoint of our results, and argue that their consistency relies on specific assumptions about steady-state points.     

Determinants of healthcare spending: a state level analysis

Within the high and rising level of healthcare spending for the US as a whole is substantial variation in spending across states. Yet relatively little attention has been given to the empirical analysis of interstate differences in aggregate healthcare expenditures, and therefore little empirical evidence exists at the state level to guide policymakers. Using data for all 50 states for the year 1998, we estimate an empirical model that includes structural and reduced-form healthcare spending equations and a health production function to assess the significance, size and relative importance of factors that prior research indicates, may play an important role in explaining interstate variation in medical care expenditures, and the main pathways through which they operate. Our results indicate higher levels of healthcare spending for state populations with higher income, less education, fewer uninsured residents, less healthy lifestyles, larger proportion of elderly residents, greater availability of medical care providers and less urbanization. Our findings suggest that the most effective cost containment measures may be those that increase education and promote healthy lifestyles. Not only do these actions lead to reductions in healthcare spending, they also improve the health status of the population, and may help to achieve other important social policy goals.     

Disaggregated approach to government spending shocks: a theoretical analysis

We calibrate a dynamic stochastic general equilibrium model that features a transmission mechanism with different types of government spending, while the literature usually treats government spending as a homogenous compound. In this regard, we manage to distinguish between different types of government spending (namely: government investment, government wage component consumption and non-wage component consumption) where each type of spending has a varied role in the economy. The government wage increase has the largest positive effect both on private consumption and output by affecting the economy through the government production. This is a natural consequence of government production being complementary to private consumption in our model. Other two government spending types, namely government non-wage consumption and government investment, also have positive effects on output, whereas their responses on (private) consumption are mostly negative. These results provide an alternative explanation for the wide range of multipliers existing in the literature as our setup enables them to produce different effects on macroeconomic variables.     

Making a difference — how environmental economists can influence the policy process — a case study of David W Pearce

Can environmental economists influence policy? If so, how? This paper addresses these two questions using the late David Pearce’s career as a case study. Influence can be exercised, but Pearce’s career shows that certain conditions must be met. The first is desire: he wanted to influence policy, and directed a high proportion of his efforts to doing so. He focused particular attention on the power centres of his time — the OECD, World Bank, European Commission, UN, UK government; his influence was aided by his status and location as a professor in a prestige university (UCL) in a major global city (London). His messages were consistent and clear: theory is important, and can be used to frame most environmental challenges as regards both explanation and solution; externalities can be valued; assessing benefits and costs of options is important; market signals (taxes etc) and incentives generally are powerful shapers of behaviour; stock of capital (human, built, natural) is a key measure of sustainability. He communicated simply and clearly, in words and phrases that Ministers for Finance and journalists could understand. All of the broadsheet newspapers in England (Financial Times, Guardian, Independent, Telegraph, Times) were grist to Pearce’s mill of advocacy for environmental economics. He provided the Blueprint books that could be read on a commute and summaries to the media that they could fit into a 1,000 word piece. He didn’t seek out, but neither did he shirk controversy. He worked with various interest groups and politicians, but never to the point were he was co-opted. He initiated and directed the MSc in Environmental and Resource Economics that created an ever-widening and influential pool of advocates for his ideas. Finally, he achieved a prodigious academic output that ensures a sort of immortality, and provided the intellectual ballast the enabled his policy influence.     

Military spending and economic growth in China: a regime-switching analysis

This article investigates the impact of military spending changes on economic growth in China over the period 1953 to 2010. Using two-state Markov-switching specifications, the results suggest that the relationship between military spending changes and economic growth is state dependent. Specifically, the results show that military spending changes affect the economic growth negatively during a slower growth–higher variance state, while positively within a faster growth–lower variance one. It is also demonstrated that military spending changes contain information about the growth transition probabilities. As a policy tool, the results indicate that increases in military spending can be detrimental to growth during slower growth–higher growth volatility periods.     

The government spending and private consumption: a panel cointegration analysis

In this article, whether an increase in government spending will crowd out the private consumption is re-examined. This article augments the empirical literature by extending this issue to panel data. The empirical framework applies the panel cointegration model, dynamic OLS (DOLS), proposed by Kao and Chiang [On the estimation and inference of a cointegrated regression in panel data. Working Paper, Economics Department, Syracuse University, 1999.]. Evidence from 24 OECD countries indicates a significant degree of substitutability between government spending and private consumption when the real disposable income is included, which rejects the permanent income hypothesis. The existence of crowding out renders the Keynesian plea for expansionary fiscal policy unconvincing.     

Same-sex spousal benefits: a Canadian perspective

Employers considering same-sex spousal benefits for employees based in Canada must deal with a number of unanswered questions. Some plan sponsors may make benefits coverage decisions based on personal or corporate beliefs or in response to employee demands.     

Government spending and economic growth: the G-7 experience

Using ordered probit estimation technique this paper examines the job satisfaction of recent UK graduates. Focussing primarily on explaining job satisfaction in terms of individuals matching to jobs, with the match depending on reservation returns, information sets and job offer rates. Only limited support can be found for the argument that job matching explains higher job satisfaction. In addition, stylizing graduates as a peer group, who form satisfaction levels based on their rankings relative to each other we examine whether or not education quality, which raises peer group status and increases the job offer rate, is systematically related to job satisfaction. The results broadly support the hypothesis that job satisfaction is neutral across graduates of different education qualities. However, our specification tests indicate that ordered probit estimation may not be fully appropriate for identifying the characteristics of those with high job satisfaction.     

Campaign spending regulation in a model of redistributive politics

Summary. We consider a model in which parties that differ in perceived valence choose how to allocate electoral promises (money, pork-barrel projects) among voters. The party perceived to be less valent has a greater incentive to “sell out” to a favored minority and completely expropriate a fraction of the electorate. By reducing the difference in perceived valence, campaign-finance regulations may reduce the extent of the expropriation and achieve a more equitable political outcome. We analyze various instruments of campaign-finance regulation from this perspective.Received: 20 Februay 2003, Revised: 25 January 2005, JEL Classification Numbers: D72, H2.Nicolas Sahuguet: Correspondence toWe thank Alessandro Lizzeri, George Mailath, and Andrew Postlewaite for their comments. We also thank the editor Dan Kovenock and an anonymous referee. The second author is grateful to the National Science Foundation for financial support under grant SES-0078870.     

Impact of government R&D spending and the bifurcating labor market on high technology and higher education

In the past decade the social effects of technological change have contributed to the increasing bifurcations in the economy and the occupational structure. These changes, taken together with the consequences of governmental research and development spending patterns and the structural changes taking place at higher educational institutions, have implications for higher education policy making in the 1990s and beyond that are too important to minimize or ignore any longer. This paper demonstrates how the academic community can enhance its income, status, and effectiveness in society by responding to the effects of technological change, and offers some strategies for coping with changing skill requirements and industry-university partnerships.     

试用装捆绑促销对消费者决策的影响

捆绑试用装的促销形式是近年来颇为流行的促销方式之一,但这种促销方式尚未得到研究者应有的关注.基于捆绑促销理论,将试用装纳入捆绑促销研究范畴,通过三个实验探讨了试用装捆绑促销对消费者购买决策的影响及其心理机制.研究结果表明,捆绑试用装降低了消费者的购买意愿;该效应受到捆绑产品溢出效应的中介作用,消费者对试用装的低吸引力评价溢出到对主产品的评价,从而导致消费者购买意愿下降.消费者整体性思维模式对这一效应具有调节作用,对于整体性思维倾向较高的消费者,捆绑试用装促销对购买决策的消极影响更大.研究结果扩充了捆绑促销研究,为营销管理者设计捆绑促销方案提供了理论指导.     

On the benefits of fiscal policy coordination in a currency union: a note

It is quite often claimed by politicians that a common currency makes it beneficial to be also endowed with a common fiscal policy. However, if fiscal policy can reasonably be considered to be a source of shocks, national fiscal policies which are steered independently from each other are generally preferable because they allow the possibility to diversify macroeconomic risks. Abstracting from automatic stabilizers, this view is valid independent on whether the ECB targets money growth or interest rates.

Health spending in Italy: The impact of immigrants

The welfare impact of immigration is a highly debated issue especially for countries on the external borders of the European Union. This paper studies how immigrants affect public health expenditure across Italian regions during the period 2003–2016 using NUTS II level data. Identification strategy is based on shift–share instruments, which are made robust to pull factors that might attract immigrants in Italy and to internal migration of natives. We find that a 1 percentage point increase in immigrants over total resident population leads to a decrease in public health expenditure per capita by about 3.8% (i.e. around 69 euro per capita). Among possible channels, we find no support for any crowding out effect from public to private health services by natives due to increasing immigration or for any role played by different levels of efficiency across regional health systems. Our results are driven by immigrants' demographic structure: they are mostly males and younger workers that call for less health spending, according to a positive selection mechanism. Moreover, linguistic barriers contribute to limiting the immigrants' reliance on public healthcare, which is confirmed also by the use of the European Health Interview Survey microdata.     

Optimal military spending in the US: A time series analysis

This paper extends previous work on the optimal size of government spending by including nested functional decompositions of military spending into consumption and investment. Post World War II US data are then used to estimate nested non-linear growth models using semi-parametric methods. As expected, investments in military and non-military expenditure are both found to be productive expenditures with respect to the private production. Moreover there is little evidence to suggest that current military spending is having a negative impact on economic growth in the US, while civilian consumption only tends to have only a weak impact. This does not imply that society will necessarily benefit from a reallocation of more spending to the military sector, nor that it is the best way to achieve economic growth.     

Causality between government spending and income: the case of Saudi Arabia

The paper investigates the Granger-causal relationship between government spending (G) and income (Y) for Saudi Arabia for which G is the main driver of economic growth. Previous studies investigated two-way causality, from G to Y (Keynesian) and from Y to G (Wagnerian). This paper investigates a new explanation (post-Keynesian) that links Y to G through banks’ loan-making and deposit-creation. The latter is accompanied by an increase in statutory reserves (R). The findings are consistent with the post-Keynesian theory (from Y to R, and to G).     

增长失衡与政府责任:基于社会性支出角度的分析

There exists a kind of growth imbalance in China’s current development process, which is essentially characterized by the imbalance between the nation’s wealth and the people’s welfare. This paper points out that growth imbalance results mostly from insufficient government social spending on people’s welfare. Consequently, the government should shoulder the basic responsibility for the provision of education, health and social security, quicken the transformation of government expenditure structure and increase the share of social spending, in order to improve the people’s welfare and achieve the rebalancing of growth. The increase in social spending can also promote the accumulation of human capital, which will help the conversion of economic growth pattern and the realization of sustainable and healthy economic development. Translated from Jingji Yanjiu 经济研究 (Economic Research Journal), 2006, (10): 4–17