User charges and bureaucratic inefficiency

This paper develops the theoretical reasons why user charge finance leads to improved government efficiency and reduced expenditures. It is argued that user charges constrain bureaucratic behavior, thus forcing the bureau to operate closer to the true demand curve for the service. Further, it is argued that user charges reduce consumer demand by connecting use and payment and by breaking fiscal illusion. This analysis leads one to expect that greater reliance on user charge finance would lead to lower government expenditures. An empirical test is performed which supports this hypothesis. The theoretical results combined with this empirical test suggest that user charges do generate lower government expenditures and a more efficient government.     

U.S. States,the Medicaid Program,and Tax Smoothing

This paper tests the tax smoothing theory by focusing on its implication that a change in permanent government spending should result in an equal sized change in the tax rate. The effect of Medicaid, a state administered, federal and state funded medical insurance program for the poor, on state tax rates is investigated. The Medicaid program provides a natural experiment for this test as states are required to cover certain groups in order to receive federal matching money. Additionally, during the 1980s, a series of federal mandates greatly increased state Medicaid expenditures. Two stage least squares is used on a panel of U.S. states (1978-1994) to test whether changes in permanent state Medicaid expenditures resulted in equal sized tax rate changes. Tax smoothing as a positive theory of state government behavior is rejected. Additionally, it is found that this rejection cannot be attributed to the stringency of balanced budget rules.     

Lotteries,Litigation, and Education Finance

In 1993, the state of Georgia instituted a lottery that earmarked new funds for instructional and capital expenditures in public schools. In that same year, Tennessee began court-ordered education finance reforms that were also designed to promote instructional and capital expenditures. Using district-level panel data, this study presents empirical evidence on how these disparate policies influenced the patterns of educational revenues by source and expenditures by function. The results suggest that both state policies increased the state aid to the poorest districts and promoted some spending on the targeted functions. However, the results also suggest that these reforms influenced spending in several other functional areas.     

Local Intergovernmental Competition and the Law of 1/n

This article proposes an empirical framework based on a synthesis of the seminal “Law of 1/n” and “Leviathan” theories, which models the relationship between government spending and the number of jurisdictions in a federal system as determined by the interplay of the costs related to centralized government (which fall as the number of jurisdictions increases) and the costs of distributive politics (which rise as the number of jurisdictions increases). Using a panel of U.S. state and local government spending data, empirical tests based on this combined framework show that the effect of intergovernmental competition predicted by the Leviathan model is partially offset by the Law of 1/n. This result helps explain the inconsistent findings in the previous empirical literature.     

On Taxation,Political Accountability and Foreign Aid: Empirics to a Celebrated Literature

The Eubank findings on taxation, political accountability and foreign aid have had an important influence on academic and policymaking debates. Eubank has warned that his findings should not be generalised across Africa until they are backed by robust empirical evidence. This paper puts some empirical structure to the celebrated literature. The empirical evidence which is based on data from 53 African countries for the period 1996‐2010 broadly confirms the Somaliland‐based Eubank hypothesis that in the absence of foreign aid, the dependence of government on local tax revenues provides the leverage for better political governance.     

Untangling the web of causalities among four disaggregate government expenditures,government revenue and output in Taiwan

Using Taiwan data, this empirical study delves into the causal links among four disaggregate real government expenditures, real government revenue and real output. The results substantiate that there is (i) neutrality between real government revenue and real government expenditure on economic development; (ii) unidirectional causality from real government revenue to real government expenditures on national defence, on general administration and on education, science and culture, confirming the tax-and-spend hypothesis; (iii) neutrality between output and the four disaggregate government expenditures; and (iv) unidirectional causality from real output to real government revenue. Several implications emerge from our empirical results.     

A multilevel government model of deficits and inflation

In this paper, an attempt is made to properly identify the link between deficits and the rate of inflation by using two alternate macroeconomic models—one based on adaptive expectations and the other on rational expectations—for a multilevel government system. It is assumed that unlike federal deficits, state deficits cannot be monetized. Nonetheless, the interaction between state and federal inflation is explicitly incorporated into the model. When expectations are formed adaptively, the model confirms the positive link between deficits and rate of inflation. However, with rational expectations, the model shows that inflation is, in part, explained by the forecast error. It is proposed that only empirical testing of the theoretical models would give credence to such conclusions.     

金融官员与地方政府隐性债务风险：抑制还是提升——来自289个地级市的经验证据

文章基于2009-2018年289个地级市数据样本，结合"烙印理论"，考察了金融官员对地方政府隐性债务风险的具体效应及其作用机理。研究发现，相对于非金融官员，金融官员能显著地抑制地方政府隐性债务风险，表现为"治理效应"。进一步研究表明，巡视未覆盖地区、地区金融生态环境越佳和制度环境越好时，金融官员抑制地方政府隐性债务风险效果越明显。文章实证分析了官员的金融经历对地方隐性债务风险的作用机理及具体效应，有效地诠释了"金融副省长现象"，为金融干部队伍建设和金融监管提供理论解释与经验证据支持，也为现阶段防范化解重大风险攻坚战提供了启示。     

Fiscal stress in local government: A case study of the tri-cities in the Commonwealth of Virginia

Ability to raise sufficient revenue to satisfy expenditure needs is the most important concern in local government financing. Local governments under fiscal stress often need to dig deep into their tax base to generate enough financing because of inflexible revenue resources. This paper examines the factors that determine the level of tax effort, particularly the influences of fiscal stress on the tax effort of three adjacent small cities in Virginia. An ordinary least squared model was formulated for this purpose. Our findings indicate that, together with fiscal stress, retail sales, state aid, the joint effect of unemployment and welfare expenditures are important factors in predicting the tax effort. The difference in response among the cities in question is also established as a result of the analysis.     

Brazilian children and the economic crisis: Evidence from the State of São Paulo

This paper briefly reviews the socio-economic conditions and the situation of children in Brazil during 1960–1980, drawing on data for the country as a whole and concentrating on the policies of the 1964–1973 years. It also examines more recent developments that led to the current crisis as well as its overall social impact on employment, food consumption and prices, and government social expenditures. The possible effects of the crisis on the welfare of children in the State of São Paulo are examined in detail. Finally, the paper reviews the government policy for protecting the poor and vulnerable in general and children in particular.     

生产性支出偏好与经济增长波动

文章基于我国1998-2006年的县级面板数据,分析财政支出结构对经济增长波动的影响机制。理论分析表明,我国地方政府偏好生产性支出的特点,将提高经济增长波动率;实证结果有力地论证了上述结论,即生产性公共支出占比提高10%,经济增长波动率将增加0.42%。稳健性分析发现中西部县级地区较东部地区经济增长的波动率更大。此外,我国生产性支出偏好对经济增长波动率的影响具有明显的顺周期特征,在繁荣时期,经济增长波动率的增加幅度将超过0.8%。文章的结论可为推进和完善中央与地方财政事权和支出责任划分提供参考和依据。     

Government Expenditures and Revenues: Evidence from Asymmetric Modeling

In this article, we examine the relationship between U.S. federal revenues and expenditures while relaxing the assumption of a symmetric adjustment process underlying the conventional cointegration and error correction model. Threshold autoregression and momentum threshold autoregression models are used to ascertain the empirical link between the two variables of the budgetary process. Our results suggest that revenues and expenditures are cointegrated and that the adjustment process of the budgetary disequilibrium is asymmetric. The application of the asymmetric error correction model indicates that revenues and expenditures respond to the long-run requirements of the budgetary balance only when the budget is worsening.     

Where is the beef? The costs of American aid and wartime China's hyperinflation

Upon the outbreak of the Pacific War (December 1941), the United States expanded its military assistance to allied nations including China under the “Lend-Lease Act”. However, the US defaulted the payment for their staff dispatched to and stationed in China which forced China to make huge sums of advance payment. The total costs of American military presence in China, including China's Reverse Lend-Lease contribution as a return to US military aid, amounted 15% to 22% of China's total fiscal expenditures. Since the beginning of 1937, the price indices increased only 200% by 1941 but rocketed to 1600 times by 1945. We develop a dynamic Fiscal Theory of Price Level (FTPL) to capture the relationship between fiscal shocks and price level. Our DSGE model shows that seigniorage (fiscal demand) driven inflationary monetary policy can lead to some hyperinflation that can be predicted and quantified. We then empirically examine the relationship between fiscal expenditures and inflation levels using provincial panel data 1937–1945. The estimation results show that local price levels increased 1.6% to 3.7% for every 10% increases of China's advance payment to US troops.     

Foreign aid,government behaviour,and fiscal policy in Papua New Guinea

The paper explores a number of long standing questions surrounding how foreign aid has influenced the fiscal behaviour of the PNG Government. This includes whether grant aid has encouraged the PNG government to be less fiscally responsible and accumulate higher levels of foreign debt; whether grant aid has tended to lower the PNG government's domestic revenue raising efforts; whether grant aid has drawn government expenditures away from key service delivery sectors; and whether budget support and project and program aid have had differential effects with respect to any of the foregoing questions. The analysis reveals several important insights regarding the interplay between foreign aid and public sector fiscal behaviour including evidence that grant aid has been an important source of debt reduction during this period. However, grant aid has tended to erode the domestic tax base, which has limited the government's ability to increase aggregate expenditure levels. Evidence is also found that suggests a significant portion of budget support was spent on key development sectors, although it also undermined domestic revenue collection. A number of policy implications follow.     

Did the New Deal solidify the 1932 Democratic realignment?

The critical election of 1932 represented a turning point in the future electoral successes of the Democrats and Republicans for over three decades. This paper seeks to measure the importance of the New Deal in facilitating the Democrats' control of the federal government well into the 1960s. We test whether long-differences in the county-level electoral support for Democratic presidential candidates after the 1930s can be attributed to New Deal interventions into local economies. We also investigate more narrowly whether voters rewarded Roosevelt from 1932 to 1936 and from 1936 to 1940 for his efforts to stimulate depressed local economies. Our instrumental variable estimates indicate that increasing a county's per capita New Deal relief and public works spending from nothing to the sample mean ($145) would have increased the long-run support for the Democratic party by 2 to 2.5 percentage points. We further find that the long-run shift toward the Democratic party after 1928 was not a function of the Roosevelt landslide victory in 1932. Roosevelt's ability to win over voters during the 1936 and 1940 elections with New Deal spending, however, did matter for the long-term.     

World War II and the growth of the U.S. federal government

This paper addresses a deceptively simple question: how much did America's involvement in World War II contribute to the long-run growth of the federal government? It is often claimed that the war produced a major federal expansion because the agencies that were created or expanded during the war retained part of their wartime budgets and authority by fighting cuts and enlisting the support of special interests. The taxes to support an expanded bureaucracy were forthcoming, moreover, because the public had been conditioned to high taxes during the war. This claim, often referred to as the `ratchet' hypothesis, is explored by investigating federal spending, federal employment, the structure of the federal bureaucracy, and the federal regulatory burden. The main conclusion is that the increases traceable to the war are better explained by changes in public attitudes toward the services provided by government, by demand, rather than by the ratchet. The question then becomes how were ratchets avoided? The paper does not offer a complete explanation, but it explores one proximate device: the creation of emergency war agencies that could easily be abolished when the war was over. The ratchet hypothesis is only one possible channel through which the war could have produced an expansion of government. In the penultimate section I argue that the war contributed to the ideological swing toward big government then in progress by apparently confirming the validity of Keynesian revolution in macroeconomics, and that through this channel the war did play an important role in the postwar expansion of the federal government.     

Demographic changes and local public expenditure in a macroeconomic perspective. Some Norwegian examples

The impact of demographic aging and changes in the age structure on local government expenditures for social services in Norway is analyzed and projected. "To model the production of the local government sector, we have developed a macro model which reflects the coverage of different services according to demographic characteristics and standards defined as man-hours per client.... The results of a simulation show that demographic changes are of minor importance for local government expenditures in most sectors when compared to changes in standard and coverage rates....Results [also] indicate that a shift in standards and coverages in different client sectors would have rather important effects on the Norwegian economy."     

Public and private Investment in Mexico and Chile: An empirical test of the complementarity hypothesis

This paper addresses the important question of whether government investment spending, rather than overall public expenditures, exerts a positive effect on economic growth and productivity. Using time-series data for Chile and Mexico, it estimates a linear growth model that incorporates a number of relevant quantitative and qualitative variables for each country. The empirical results suggest that for both Chile and Mexico, increases in public and private investment spending have a positive and significant effect on the rate of growth in productivity. Moreover, the results for Mexico show that increases in government consumption expenditures have a negative effect on the rate of productivity growth, thus suggesting that the composition of government spending is at least as important as the growth rate of these expenditures in affecting economic growth. From a policy standpoint, these findings call into question the current trend among Latin American countries of indiscriminately reducing public spending because they fall disproportionally on capital expenditures—the type of spending needed to secure the long-term efficiency gains from market-oriented programs.     

Local government consumption and firm performance: Evidence from the "TPCs" in China

Government consumption is an important factor affecting corporate performance. By exploiting a unique data set that reveals the Three Public Consumptions (TPCs) of China’s prefecture-level city governments, this paper investigates the impact of actual local government consumption on corporate performance and identifies the potential impact mechanism. We show that increases in local government consumption did lead to declines in firm productivity. TPC expenditures on official cars and official receptions had the most obvious impact on corporate performance. After considering endogenous measurement errors and substitution variables, the conclusion remained stable. Moreover, we show that the increase of local government TPC expenditures caused an increase in corporate tax burden, a decline in government efficiency, and excessive administrative intervention, which in turn caused a decline in firm performance. Our findings are particularly pronounced in non-state-owned enterprises, in firms with tight financing constraints, and in regions with weak marketization and low budget transparency. This study expands the theory that government behavior affects corporate performance, and also provides policy implications regarding restraints on government consumption.     

美国理性增长发展演变及启示

城市蔓延发展日益引起美国的高度关注，美国各层政府提出了理性增长战略来应对城市病，遏制城市蔓延发展。理性增长理论经过三波发展演变过程，内容与时俱进，日趋完善。借鉴美国理性增长运动的理念和经验，对于中国的经济、环境和社会的永续发展意义重大。