WAGNER'S LAW REVISITED: A NOTE FROM SOUTH AFRICA

The aim of this note is to reassess the validity of Wagner's law for South Africa for the period 1950‐2007 using cointegration and causality tests. The evidence shows causality running from income to government expenditure, thus supporting the Wagnerian proposition of an expanding public sector. Using five different long‐run estimators, we found that the size of South Africa's public sector was positively and significantly related to South Africa's national income. The elasticity ranges from 1.12 to 1.57, implying that a 1% increase in income leads to a 1.12‐1.57% increase in government expenditure.     

Unemployment: The role of the public sector in increasing the labour absorption capacity of the South African economy

The critical proportions of unemployment and the mainly structural nature of the problem necessitate a re‐evaluation of policy measures in order to foster a pro‐poor growth and development process in South Africa. The propblem could be addressed by implementing an integrated and comprehensive policy package. The public sector expenditure programme is a potent policy measure for stimulating employment growth in the economy. It is argued that a restructuring rather than an expansion of the public sector expenditure programme can result in short‐term, enduring employment effects. The restructured public sector expenditure programme should include characteristics of special employment programmes, focusing on the procurement and provision of more labour‐intensive goods and services and a reorientation of expenditure programmes in favour of the unemployed and the poor.     

The role of the Spanish imperial state in the mining‐led growth of Bourbon Mexico's economy1

Colonial Mexico's economy experienced a long phase of growth during the eighteenth century. Around 1800, silver exports and fiscal surplus remittances from the colony rose to unprecedented levels. We study the contribution of the Spanish imperial state's policy to the expansion of silver production and the leading role of mining in economic growth and its fiscal implications. We find evidence to support a more favourable view of both the mining sector and the imperial state than that commonly presented in the literature. The interruption of colonial ‘mining‐led growth’ helps to explain the ‘lost decades’ for the economic development of Mexico after independence.     

Economic growth target,distortion of public expenditure and business cycle in China

In this study, we provide empirical evidence on the incentive role of official promotion from the perspective of managing economic growth targets. Using a manual dataset of economic growth targets in 230 Chinese cities during 2003–2016, we find that economic growth targets of governments curb public service expenditure on education, science and technology and this distortion results in the stagnation of human capital and technological progress, constraining long-term economic growth. When the growth target size of cities exceeds that of higher-level governments or if governments overfulfill their growth target tasks, then public service expenditure will decrease. We interpret the empirical findings as evidence that promotion evaluation based on economic performance distorts the composition of public expenditure, hinders sustainable economic development, and even accelerates the start of an economic downturn. Our study adds significant evidence to the theoretical literature emphasizing that the official evaluation system and public service could affect business cycle.     

What Do OECD Countries Cut First When Faced with Fiscal Adjustments?

Following the present scale of fiscal imbalances in developed countries, significant fiscal consolidation will be inevitable in the coming years. Fiscal discipline will require cuts in government expenditure, leading to trade‐offs between different components of government expenditure. In this article, we explore the relationship between components of government expenditure and government size during the period 1970‐2007 for a sample of 25 developed countries to shed light on how fiscal discipline might influence public spending composition in the coming years. Using the Pooled Mean Group estimation we find that fiscal adjustments protect functions that have both a social and productive character, such as education and health spending. In addition, the most productive spending, that related to transport and communications, is also isolated from budgetary cuts. This result shows evidence of governments reacting to the voter's increasing realization that reducing productive expenditures harms long‐term economic growth by striking a balance between utility and economic‐growth‐enhancing expenditure.     

广西公共财政农业支出和农村居民收入的实证研究

采用灰色关联分析方法,对广西公共财政农业支出和农村居民收入增长之间的关系进行实证研究。结果表明:广西公共财政农业支出额度与促进农村居民增收效率不匹配,即支援不发达地区资金中用于农业的支出额度较小,但其促进农村居民增收的作用最强,支农支出所占份额最大而其促进农村居民收入的作用很弱,广西公共财政农业支出绩效处于较低水平层次。最后,提出大力增加农业支出、调整农业支出结构的建议。     

Africa's clientelist budget policies revisited: public expenditure and employment in Kenya,Tanzania and Uganda, 1960–2010

What can be learned about policy prioritization in Africa by examining long‐run trends in public expenditure and employment? Many have contended that Africa's post‐colonial leaders pursued economically unproductive budget policies that prioritized the growth of their patronage networks over socially beneficial spending, resulting in bloated payrolls, persistent deficits, and a large rent‐seeking public service. Using a purpose‐built dataset of annual public expenditure and employment series from Kenya, Tanzania, and Uganda for 1960–2010 against which to test these assumptions, this article questions whether there was anything exceptional about the growth or composition of East Africa's post‐independence expenditure. All three states grew and contracted in roughly the same periods as other regions of the world, although their contraction after 1980 was particularly marked. Industrial policy and capital investments influenced budget priorities in the early independence era, while military expenditure and debt service payments escalated in the late 1970s. The government wage bill, meanwhile, fell as a proportion of total spending over the same period. To finance employment growth while the wage bill contracted, governments allowed real wages to plummet in the 1970s–90s. In light of these external constraints and legacies, this article questions whether a budget unencumbered by patronage would have looked very different.     

Agricultural growth multipliers for two communal areas of KwaZulu-Natal

Expenditure data were collected from 99 households in two rural areas of KwaZulu-Natal. District and wealth group expenditure analyses suggest a less-than-proportional increase in the demand for tradable farm commodities, and a more-than-proportional increase in the demand for non-tradable farm commodities following a 1 per cent increase in household expenditure. Expenditure on non-farm tradables (imported consumer durables) showed the greatest potential for demand growth, with expenditure elasticities ranging from 1,75 to 2,59. An increase of R1,00 in household income is predicted to add an additional 28 cents (multiplier of 1,28) to the local economy. The study estimates relatively weak growth linkages. However, even relatively weak growth linkages could lead to much needed new income and employment opportunities in the local farm and non-farm sectors if the constraints limiting agriculture, and hence broad-based growth in rural incomes, are alleviated. Agriculture-led growth in South Africa requires public investment in both physical and institutional infrastructure to reduce transaction costs and risks in all markets, thus encouraging greater participation by local entrepreneurs and private sector investors. In addition, the roles, functions and services offered by extension agents should be extended to promote collective marketing, facilitate land rental contracts and provide training, technical and business support for farm and non-farm entrepreneurs.     

香港医疗体系融资分析

香港健康与医疗发展咨询委员会指出,香港的公共医疗卫生开支持续增长,开支增幅令人忧虑,正考虑应当如何为医疗服务融资。本文试图分析香港医疗卫生的融资状况,并为香港医疗改革提供政策建议。文章回顾了香港医疗卫生系统概况,分析了香港政府和市民的医疗开支财力负荷,以及香港医疗保险的发展状况,认为政府的财力负荷过重,市民整体上承担的医疗负荷偏低,并建议改革公立医院收费制度及鼓励私营医疗保险发展。     

The External Debt‐Servicing Constraint and Public‐Expenditure Composition in Sub‐Saharan Africa

Abstract: In the light of the current global financial and economic crises, how would governments in sub‐Saharan Africa (SSA) allocate their budgets across sectors in response to a binding debt‐servicing constraint? Within a framework of public‐expenditure choice, the present paper estimates constraint‐consistent debt‐service ratios and employs them in a Seemingly Unrelated Regression involving a five‐year panel for up to 35 African countries over 1975–94, a period preceding the Highly Indebted Poor Countries (HIPC) initiatives. While observed debt service is found to be a poor predictor of expenditure allocation, constraining debt servicing shifts spending away from the social sector, with similar impacts on education and health. The implied partial elasticity of the sector's expenditure share with respect to debt is estimated at 1.5, the highest responsiveness by far among all the explanatory variables considered, including external aid. Thus, if the social sector is to be protected, sufficient debt relief for SSA countries should be pursued.     

Estimating the future health care cost of population aging in South Africa

ABSTRACT

This paper analyses the relationship between health care expenditure and population aging in South Africa using yearly data from 1983 to 2015. Empirical evidence from an Autoregressive Distributed Lag approach to cointegration indicates that old dependency and life expectancy are major drivers of public health expenditure in South Africa besides the income. Particularly, when structural breaks are controlled for, income exhibits a long-term elasticity with respect to health spending greater than unity; suggesting that South African public health care has become a luxury good over time. Interestingly, South African public health spending is found to be responsive to demographic development only in the long run. This is consistent with the micro evidence that health expenditure increases with individual age with significant impacts in the long term. Finally, using economic and demographic projections statistics, we find that public health expenditure could roughly double in the next fifteen years ceteris paribus.     

Enforced informalisation: The case of liquor retailers in South Africa

After a decade of unsuccessful efforts to migrate informal businesses to South Africa's formal economy there remains little understanding of the dynamics in this sector, especially as regards micro-enterprises. International literature discusses ‘exit’ and ‘exclusion’, holding that poor law enforcement is the reason for the persistence and growth of the informal economy. Through examining the informal liquor retail (shebeen) sector, we demonstrate that enforcement actually produces informality in this sector. Illustrated with examples from one of our sites in Delft South, Cape Town, the article describes key aspects of shebeen business practice, including the responses to greater law enforcement. Notably, instead of closing shop or facing the hurdles of compliance, the great majority of shebeens continue to evade the law by downscaling their activities. This finding has implications not just for liquor policy in South Africa, but for understanding both theories of formalisation and theories of the informal economy.     

Caste and Religion-Based Wage Discrimination in the Indian Private Sector: Evidence from the Indian Human Development Survey

Using data from the Indian Human Development Survey, we examine evidence of caste and religion-based discrimination in the Indian private and public sector. Both Dalits and Adivasis show significant results of discrimination in the private sector, and benefit disproportionately from working in the public sector. This is strong evidence that at least some of the affirmative action policies in the public sector are proving effective. The policy implications are relevant: should similar affirmative action policies be implemented in the private sector? Further, this research suggests a path for further research to understand why protected castes do not benefit from affirmative action programs to the same extent as Dalits and Adivasis.     

PUBLIC ENVIRONMENTAL EXPENDITURES IN INDONESIA

The economic justification for public expenditure is especially strong in the case of environmental management. Yet expenditures on environmental management have received little attention in public expenditure reviews by the World Bank and other international development organisations. An initial analysis of environmental expenditures in the Indonesian government budget between FY1994/95 and FY1998/99 yields four basic findings. First, most spending in the nominal environmental sector, sector 10 (Environment and Spatial Planning), is on non-environmental activities, and much environmental expenditure occurs in other budget sectors. Second, environmental expenditures fell sharply in real terms during the economic crisis, to levels far below those in FY94/95. Third, they also fell sharply relative to the budget and to GDP. Finally, environmental expenditures declined more in Indonesia during the economic crisis than in Malaysia, Thailand and Korea, relative to both the budget and GDP.     

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。     

Industrial structure change and economic growth: A China-Russia comparison

This paper examines the sources of economic growth and the nature of industrial structure change in China over the past decade, with a comparison to those in Russia. It shows that over the observation period between 1995 and 2008, the Chinese economy was concentrated relatively more in the manufacturing sector and relatively less in the service sector than the Russian economy. In addition, this paper finds that the higher economic growth rate in real GDP and aggregate labour productivity growth between 1996 and 2008 in China than in Russia was broadly based, with most industries contributing to China's better performance. Furthermore, it reveals that the acceleration in economic growth in China in 2003–2008 over 1996–2002 was mainly traced to an increased contribution from the manufacturing sector and to a lesser degree the service sector, while in Russia, it was the service sector, followed by the primary sector driven by the mining and oil and gas extraction industry. These results suggest that the Chinese and Russian economies complement each other, which bodes well for further economic cooperation and trade between the two countries.     

Fiscal deficits, public debt, and government solvency: Evidence from OECD countries

This paper discusses different empirical tests of public sector solvency and applies them to a sample of 18 OECD countries. Under the maintained hypothesis that the government solvency constraint needs to be imposed, these tests develop from the idea of verifying whether the intertemporal budget constraint of the public sector would be satisfied (a) if the fiscal and financial policy in the sample had been pursued indefinitely and (b) if the relevant macro and structural features of the economy were stable over time. If solvency is not supported by the empirical evidence, a change either in the policy or in the relevant macro and structural variables (growth, inflation, interest rates, demographic factors) must occur at some point in the future. Among the G-7 countries, public sector solvency seems a serious issue in Italy, whereas it does not appear to be a problem in Germany and Japan. The evidence for the United States is mixed. Problems of sustainability of the current path of fiscal policies are also present in Belgium, Ireland, The Netherlands, and Greece.     

The German bank–growth nexus revisited: savings banks and economic growth in Prussia†

This article provides evidence that smaller, regional public financial intermediaries contributed to Germany's industrial development, using a new dataset of the foundation year and location of Prussian savings banks. This extends the bank–growth nexus beyond its traditional focus on large universal banks. Since savings banks were public financial intermediaries, our results further suggest that state intervention can be successful in the financial sector, particularly at the early stages of industrial development when capital requirements are manageable, and access to international capital markets is limited.     

Reconceptualizing the Developmental State: Public Savings and Economic Growth

Developmental state theory suggests that rapid economic growth can be achieved when states allocate financial resources to strategic industrial sectors. While not denying this mechanism, I argue that an equally important component of state-led growth is public sector efforts to mobilize financial resources for investment and growth. I support this argument with crossnational statistical evidence, and a Brazilian case study, both of which suggest that public savings substantially influence economic growth rates.     

Examining Foreign Aid Fungibility in Small Open Economies

The paper uses a non-scale growth model to examine the behavior of a small open economy to varying degrees of foreign aid fungibility. Shifting government resources to public consumption while allocating the aid to either type of public expenditure or as a pure transfer changes the productivity of the private factors in production. Agents respond, as with any government transfer, by adjusting consumption, debt and work effort. Private capital accumulation slows and the welfare effect dominates. The fungibility results maintain for parameterizations that reflect limited substitution in production and where the public capital externality is small. The analysis, which employs extensive numerical simulations, emphasizes the tradeoffs between long-run capital accumulation and welfare that maintain even when aid is fungible. The simulations highlight the complementarity between foreign aid and public expenditure, the tradeoff between welfare and capital accumulation, and that aid cannot replace the government??s own commitment to financing public expenditure. The results suggest that a policy in which the government is required to maintain its expenditure commitment to public capital yields the highest level effects to capital accumulation, consumption and output.