OPTIMAL EDUCATION POLICIES AND COMPARATIVE ADVANTAGE

We consider the optimal education policies of a small economy whose government has a limited budget. Initially, the economy is closed and the government chooses its education policy to maximize welfare under autarky. When the economy trades with the rest of the world the government chooses a new education policy that maximizes welfare under trade. Is it ever optimal for the government to choose its new policy so that it reverses the economy's comparative advantage? We find that if the budget stays fixed when it is optimal to ‘move up the skills chain’ it is not feasible. In such a case, a foreign loan is welfare improving. A move in the opposite direction can be optimal, and when it is optimal it is also feasible.     

Government spending and revenues in Sweden 1722–2011: evidence from hidden cointegration

This study examines the long-run causal relationship between government revenues and spending of the Swedish economy over the period 1722–2011. The results based on hidden cointegration technique and a modified version of the Granger non-causality test, show that there exists a long-run and asymmetric relationship between government spending and government revenues. Our estimation results can be summarized into three main empirical findings. First, the government follows a hard budget constraint and soft budget constraint strategies in the case of negative and positive shocks, respectively. Second, negative shocks to the fiscal budget are removed fairly quickly compared to positive shocks. Third, bi-directional causality between revenues and expenditures offers support in favor of the fiscal synchronization hypothesis. The policy implication is that budget deficit’s reduction could be achieved through government spending cut, accompanied by contemporaneous tax controls.     

A note on the sustainability of full employment in the presence of budget deficits

In a recent issue of this journal, Tymoigne and Wray, as well as Palley, discussed whether economies can experience stable full-employment equilibria with persistent public budget deficits. This implies continuous growth of a stock-variable: high-powered money and/or government bonds in the hands of the private sector. Their discussion assumed a stationary state. The question is whether such a situation can be regarded as sustainable over time. This paper argues that a satisfactory solution to the problem can be found only by abandoning the hypothesis of stationary state and considering the effects that different compositions of public expenditure have on the rate of growth. To have a stable full-employment equilibrium with budget deficits, the economy must grow. Since the economy is assumed to be in full employment, the growth of aggregate output must be entirely due to the growth of productivity, which can be realized by changing the composition of public spending in favor of productive expenditures.     

政府部门预算支出绩效管理改革框架分析

政府部门预算支出绩效管理改革是在公共财政制度体系建设过程中,为适应我国市场经济体制的不断发展与完善,遵循政府预算支出管理制度变革的一般规律,而对我国政府公共部门财政预算管理制度提出的客观要求。其中理论框架构建、制度设计创新、技术手段要点是这项改革的核心内容,通过以上改革框架的分析设计,将为未来我国政府预算支出绩效管理制度体系的搭建和改革实践提供科学、可靠的理论基础与现实指导。     

Social security, public education and the growth-inequality relationship

We study how the relationship between economic growth and inequality depends upon the levels of funding of two of the largest government programs, public education and social security. We do this in the context of an overlapping generations economy with heterogeneous agents where the government collects a tax on labor income to finance these programs. We show that in our model an increase in government spending on social security reduces income inequality and can have a non-monotonic effect on growth. When the initial level of social security funding is low, as is the case in most poor economies, then its increase will enhance growth. When its funding level is high as is typical for developed countries, we show that its further increase can slow down growth while reducing income inequality. These results obtain regardless of whether the increase in social security funding is financed by a tax increase or by cutting the public education budget. We also find that the effects of increasing the level of public education expenditures or the overall size of the government budget (holding the budget composition fixed) are characterized by similar non-monotonic growth-inequality relationships.     

Macroeconomic Policy to Aid Recovery after Social Distancing for COVID-19

Using the Keynesian model set out in McDonald (2020), in which downward wage rigidity is supported by worker loss aversion with respect to wages, this article shows that a period of social distancing (SD) can leave a post-SD economy with both stimulatory and depressive effects. A loss of productive capacity is stimulating. Costs of restarting firms, lower labour productivity when restarted and a desire to restore wealth from debt incurred during the period of SD are depressive. If, as seems highly probable, the net effect on economic activity is negative then a fiscal expansion can restore activity. To avoid an increased government budget deficit, this expansion would probably require an increased tax rate. Reductions in real wages may also be necessary. A desire to balance the government budget combined with no increase in the tax rate would be unfortunate, because it would cause a further contraction in activity from its post-SD level.     

Intertemporal Budget Policies and Macroeconomic Adjustment in Indebted Open Economies

This paper analyzes the role of government intertemporal budget policies in a growing open economy including nominal assets in the presence of an upward sloping supply of debt. This introduces transitional dynamics that influence the effects of government policy instruments on economic growth and the long term fiscal liability. It is shown that capital income taxes or a combination of tax‐cum‐expenditure or government expenditure alone can balance the long term intertemporal government budget constraint. However, those results are shown to depend critically upon the extent of distortion in capital flows brought about the upward sloping supply of debt.     

Fiscal policy,government debt,and economic growth in the Kaleckian model of growth and distribution

This article presents the Kaleckian model of growth and distribution that sets a budget deficit ratio as an indicator of fiscal policy and examines the short- and long-run effects of an increase in budget deficits and a rise in income tax rates on the economy. The key short-run outcomes are as follows. First, expanded budget deficits have a positive effect on the rate of capacity utilization. Second, the tax rate for wage income does not affect the rate of capacity utilization, whereas the tax rate for capital income has a favorable impact on it. This result implies that raising the tax rate for capital income can be an important policy instrument for stimulating the economy. Third, we find that the economy exhibits a wage-led aggregate demand in the short run. The main long-run results are as follows. First, the effect of expanded budget deficits on the growth rate is ambiguous, since a higher debt burden negatively influences the rate of capacity utilization and hence economic growth, despite the increase in demand caused by government borrowing. A higher budget deficit ratio thus raises the growth rate only if a certain condition is satisfied. Second, the tax rate for capital income has a positive impact on the growth rate. Third, the economy shows a wage-led growth in the long run.     

Inflation and the Impact of Budgets

This article focuses on the adjustment of budget figures for the effect of inflation on the value of government debt. It asks whether such adjustment improves their performance as a measure of 'fiscal impact'. If inflation significantly influences the impact of budgets on the real economy, policy-makers may make inappropriate fiscal policy decisions if they are guided by unadjusted budget figures. The article argues that if agents perceive holdings of government debt as part of their wealth, changes in the real value of debt will have an effect on consumption behaviour. Therefore to assess the impact of fiscal policy on consumption it may be necessary to adjust budget figures so that they accurately indicate changes in the real value of debt held by the private sector. This article adjusts a series of structural public sector borrowing requirements (PSBR) for the effect of inflation on the real value of government debt held by the private sector. An empirical analysis concludes that the inflation-adjusted budget series provides a superior measure of fiscal impact on consumption, and hence the real economy.     

Aggregate stability under a budget rule and labor mobility

Whether a balanced budget rule stabilizes or destabilizes an economy depends on various factors such as the production function or the instrument used to balance the budget. This paper argues that migration, which has widely been neglected in the literature, also affects equilibrium properties. We study the effect of pro-cyclical labor mobility in a neoclassical growth model with public debt and a balanced budget requirement. Labor mobility can destabilize the economy due to external effects. After a negative shock hits the economy, living abroad becomes relatively more attractive, resulting in out-migration. This increases per capita public debt as migrants leave behind their implicit liabilities. The government increases tax rates to satisfy the balanced budget requirement, which further depresses the economy and increases out-migration. The destabilizing effect of public debt kicks in at only slightly higher debt levels than the ones observed in the Euro area after the financial crisis.     

Useful Government Spending and Macroeconomic (In)stability under Balanced-Budget Rules

It has been shown that an otherwise standard one‐sector real business cycle model may exhibit indeterminacy and sunspots under a balanced‐budget rule that consists of fixed and “wasteful” government spending and proportional income taxation. However, the economy always displays saddle‐path stability and equilibrium uniqueness if the government finances endogenous public expenditures with a constant income tax rate. In this paper, we allow for productive or utility‐generating government purchases in either of these specifications. It turns out that the previous indeterminacy results remain unchanged by the inclusion of useful government spending. By contrast, the earlier determinacy results are overturned when public expenditures generate sufficiently strong production or consumption externalities. Our analysis thus illustrates that a balanced‐budget policy recommendation which limits the government's ability to change tax rates does not necessarily stabilize the economy against belief‐driven business cycle fluctuations.     

Revenue decentralization,central oversight and the political budget cycle: Evidence from Israel

This paper examines whether revenue decentralization and direct external financial supervision affect the incidence and strength of political budget cycles, using a panel of Israeli municipalities during the period 1999–2009. We find that high dependence on central government transfers – as reflected in a low share of locally raised revenues in the municipality's budget – exacerbates political budget cycles, while tight monitoring – exercised through central government appointment of external accountants to debt accumulating municipalities – eliminates them. We also find that this pattern is predominantly accounted for by development expenditures. These results suggest that political budget cycles can result from fiscal institutions that create soft budget constraints: that is, where incumbents and rational voters can expect that the costs of pre-election expansions will be partly covered later by the central government.     

财政波动风险与保险平滑机制：以地震灾害救助为例

文章基于我国重大地震灾害易引起财政剧烈波动的现实背景，借鉴国际上普遍采用的保险机制替代财政救灾的方式，根据我国地震相关历史数据，通过构建地震灾害财政救灾支出负担的积累模型，模拟了在不同保险金额下2014－2020年我国地震灾害财政积累救灾支出负担的变动情况，并以此检验保险如何平滑财政波动风险的事例。研究结果表明：政府购买保险可以有效地平滑财政救灾支出的波动性风险，且波动性与保险赔付呈反向关系。在98％的置信区间与10％的赔付率下，100亿元保额的地震保险可以使财政积累救灾负担的上下界各有08．％和12．％的下降，而1000亿元保额则可以基本消除财政救灾支出的波动性风险。文章研究表明，建立巨灾保险制度可以促进我国经济的稳定运行，有助于政府优化灾害管理、提高救灾效率、发挥市场功能和尽快建立巨灾保险体系。     

中国的高货币化之谜

通过将政府对银行体系的补贴和担保因素引入Mckinnon的最优货币化模型,本文初步认定政府对银行体系的控制是导致中国高货币化结果的基本原因。而基于BaileyCagan函数的提示,本文进一步发现,在政府对银行体系实施有效控制的前提下,内部货币扩张具有与外部货币扩张不同的货币需求“预算约束”和福利后果。其要害是,它可以兼容在货币化进程原本存在显著利益冲突的政府和居民部门的效用,从而使得中国的高货币化与货币价格的稳定并行不悖。本文的结论是,由于中国的高货币化具有十分特殊的金融制度内涵,因此既不能简单夸大其负面效应,也不能过高期望数量调整政策的效果。合理的做法应当着眼于调整政府、银行体系与居民部门基于内部货币扩张而形成的利益关联机制,以改变货币需求的“预算约束”和潜存于经济中的货币化激励。     

Bond financed fiscal policy and the problem of instrument instability

Previous analyses of bond financed government expenditure policies have indicated stability problems but have considered only a once-for-all and sustained increase in government spending. In this paper we examine the bond financing of temporary government expenditure changes, which form part of an ongoing policy designed to “balance the budget over the business cycle.” We find that an endogenous fiscal policy can keep national output near its target value but that the effects on the national debt and the size of the public sector are likely not to be transitory. There is a strong tendency toward instrument instability, in that control of the economy forces the level of government spending to forever diverge from its equilibrium value.     

Public procurement in times of crisis: The bundling decision reconsidered

The government wants two tasks to be performed. In each task, unobservable effort can be exerted by a wealth-constrained private contractor. If the government faces no binding budget constraints, it is optimal to bundle the tasks. The contractor in charge of both tasks then gets a bonus payment if and only if both tasks are successful. Yet, if the government has only a limited budget, it may be optimal to separate the tasks, so that there are two contractors each in charge of one task. In this case, high efforts in both tasks can be implemented with smaller bonus payments.     

政府预算部门的行为特征及其治理结构

在政府预算管理中，鉴于预算管理部门所内生的诸多行为特征，单纯通过约束政府预算部门的单方行为，难以达到提高预算资金效率的目标。现实的预算管理，需要在不同利益相关主体之间，实现某种程度的整合。通过构建共同治理框架，才能提升预算资金的配置效率。在操作策略上，可以通过总额预算控制、年度预算的分部门审议等方式加以实现。     

Death and the Keynesian multiplier

The Blanchard-Yaari continuous-time model of overlapping generations is applied to a monetary economy with Keynesian unemployment. It is shown that a positive probability of death increases the short- and long-run multipliers of government spending on output. In the first example this is due to the government deficit being bond-financed, plus the failure of Ricardian equivalence which death implies. In the second, where the government budget remains balanced, it is due to the private accumulation of capital, which has a wealth effect on consumption. However, in the absence of death, this is negated by the higher lifetime tax burden.     

The value of changes in individual risk in a large mixed economy

Changes in an individual's risk will affect all other individuals in the economy because of the interdependence created by the government's budget constraint. If government policy is optimal, these spillover benefits are measured by the change in the expected government budget surplus.     

Tax smoothing with immigration in an overlapping generations economy

Immigration policy in an overlapping generations economy is politically determined in response to government spending shocks, where the government finances its spending with proportional income taxes and is subject to a balanced budget. The young cohort is always the majority and dictates policy. The equilibrium Markovian strategy allows immigrants when the spending shock is above some threshold and this implies a particular form of tax smoothing.