Institutional development,financial deepening and economic growth: Evidence from China

There have been profound changes in both political and economic institutions in China over the last 20 years. Moreover, the pace of transition has led to variation across the country in the level of development. In this paper, we use panel data for the Chinese provinces to study the role of legal institutions, financial deepening and political pluralism on growth rates. The most important institutional developments for a transition economy are the emergence and legalization of the market economy, the establishment of secure property rights, the growth of a private sector, the development of financial sector institutions and markets, and the liberalization of political institutions. We develop measures of these phenomena, which are used as explanatory variables in regression models to explain provincial GDP growth rates. Our evidence suggests that the development of financial markets, legal environment, awareness of property rights and political pluralism are associated with stronger growth.     

Corruption,growth, and governance: Private vs. state-owned firms in Vietnam

We provide a firm-level analysis of the relation between corruption and growth for private firms and state-owned enterprises (SOEs) in Vietnam. We obtain three different measures of the perceived corruption severity from a 2005 survey among 741 private firms and 133 SOEs. We find that corruption hampers the growth of Vietnam’s private sector, but is not detrimental for growth in the state sector. We document significant differences in the corruption severity across 24 provinces in Vietnam that can be explained by the quality of provincial public governance (such as the costs of new business entry, land access, and private sector development policies). Our results suggest that corruption may harm economic growth because it favors the state sector at the expense of the private sector and that improving the quality of local public governance can help to mitigate corruption and stimulate economic growth.     

The Political Economy of Financial Regulation: Evidence from U.S. State Usury Laws in the 19th Century

Financial regulation was as hotly debated a political issue in the 19th century as it is today. We study the political economy of state usury laws in 19th century America. Exploiting the wide variation in regulation, enforcement, and economic conditions across states and time, we find that usury laws when binding reduce credit and economic activity, especially for smaller firms. We examine the motives of regulation and find that usury laws coincide with other economic and political policies favoring wealthy political incumbents, particularly when they have more voting power. The evidence suggests financial regulation is driven by private interests capturing rents from others rather than public interests protecting the underserved.     

Politics of Financial Reporting and the Consequences for the Public Sector

This article examines the political processes surrounding public sector accounting standard setting, in particular, the Australian decision to adopt sector-neutral International Financial Reporting Standards (IFRS). It contends that the history of private and public sector involvement in the accounting standard setting process to date, and recourse to regulatory theory, assist in understanding these contemporary developments. The article reveals that private sector interests have dominated accounting standard setters at all important stages of standard setting in Australia. It concludes by arguing that, given this continued neglect by standard setters, if public sector financial reporting standards are to remain relevant to the public sector, then it may be necessary for public sector regulators to set their own standards.     

Rent-seeking and innovation

Innovations and their adoption are the keys to growth and development. Innovations are less socially useful, but more profitable for the innovator, when they are adopted slowly and the innovator remains a monopolist. For this reason, rent-seeking, both public and private, plays an important role in determining the social usefulness of innovations. This paper examines the political economy of intellectual property, analyzing the trade-off between private and public rent-seeking. While it is true in principle that public rent-seeking may be a substitute for private rent-seeking, it is not true that this results always either in less private rent-seeking or in a welfare improvement. When the public sector itself is selfish and behaves rationally, we may experience the worst of public and private rent-seeking together.     

The Implementation and Use of Benchmarking in Local Government: A Case Study of the Translation of a Management Accounting Innovation

Benchmarking is a management accounting innovation (MAI) that can be used for performance measurement and management in both the private and the public sectors. Although public sector accounting researchers have reported some success with the use of benchmarking, frequently charged problems exist in implementing and using this management technique. To look beyond the technical and institutional explanations, this paper takes a translation approach and presents a case study of a local government benchmarking network. We conclude that there is a link between benchmarking implementation problems and initiators’ failure to build a strong network of benchmarking allies. Implementation is facilitated if actors, other than the initiators, recognize the possibility of making benchmarking more relevant and less cost focused. However, even when a network of actors has a favourable attitude towards benchmarking, benchmarking may still appear as an unruly ‘actant’. Furthermore, the perception of implementation failure and success is heterogeneous and connected to various actors’ adoption of benchmarking. We also conclude that there is a connection between the use of benchmarking and 1) actors’ possibilities to use benchmarking in the struggle for resources and 2) the perception of benchmarking information as ‘factual’ or ‘factual enough’. However, the perception of benchmarking information as ‘factual’ or ‘factual enough’ seems not only a matter of correct or incorrect ratios but also of whether such information serves actors’ interests. A final conclusion is that the use of benchmarking increases when actors other than the initiators complement the original idea and ‘counter interest’ the initiators.     

Financial sector foreign aid and financial intermediation

The effectiveness of foreign aid is typically measured by the effect of aid on economic growth. Prior literature provides ambiguous results on this effect partly due to the aggregation of aid to different sectors and the small amount of foreign aid relative to the economy in most countries. Because growth in financial intermediation and financial markets has been shown to play a key role in spurring economic growth, in this paper we focus on aid to the financial sector and seek to identify the causal effects of foreign aid to the financial sector on financial intermediation. Using fixed effects OLS and system GMM methods for a panel of countries from 1993 to 2016, we find that foreign aid to the financial sector primarily increases claims on the government sector, and has negative or neutral effect on claims to the private sector and no effect on liquid liabilities of the banking sector and interest rate spread between borrowing and lending rates. This effect persists even after controlling for country institutional characteristics, such as trade openness and rule of law. Thus, foreign aid increases public sector borrowing but does not appear to have any benefits for financial intermediation in the private sector. We verify that the relation is not spurious by using aid to the health sector for falsification tests.     

Does the economy matter? Tough times,good times,and public service motivation

This paper describes a pilot study which explored the effects of different economic conditions on the public service motivation (PSM) levels of a small group of government and private sector employees in Malaysia. It address three questions: are the PSM levels of government employees significantly higher than those of private sector employees; are the PSM levels of employees significantly influenced by their perceptions of the external economic environment; and is the relationship between the economy and PSM affected by the sector of employment? Government employees’ PSM levels were found to be higher than those of the private sector employees, and were sensitive to perceptions of different economic conditions.     

The political economy of mixed public and private schooling: A dynamic analysis

This paper analyzes the political economy of education, acquired through a combination of compulsory public schooling and supplementary private education, in the context of an OLG model in which growth is driven by the accumulation of human capital. The level of public schooling, fully funded by a proportional income tax, is determined by majority vote, while supplementary private education is purchased individually. We show existence of a political-economic equilibrium, and examine its characteristics, describing the evolution of the publicprivate mix over time: for moderate parameter values the share of public schooling increases as incomes rise, and inequality falls.     

The impact of unions on municipal elections and urban fiscal policies

The efficient decentralized provision of public goods requires that special interest groups, such as municipal unions, do not exercise undue influence on the outcome of municipal elections and local fiscal policies. We develop a new political economy model in which a union can endorse one of the candidates in a local election. A politician that prefers an inefficiently large public sector can, therefore, win an election if the union can provide sufficiently strong support during the campaign. We have assembled a unique data set that is based on union endorsements that are published in leading local newspapers. Our empirical analysis focuses on municipal elections in the 150 largest cities in the U.S. between 1990 and 2012. We find that challengers strongly benefit from endorsements in competitive elections. Challengers that receive union endorsements and successfully defeat an incumbent also tend to adopt more union friendly fiscal policies.     

PFIs involving multiple public partners: a case study from the Italian healthcare sector

The financial crisis experienced by many countries since 2008 has given new importance to private finance initiatives (PFIs) for providing public services. This paper analyses the relationships between multiple public and private sector actors participating in a PFI in the healthcare sector in order to better understand the motives and behaviour of public and private sector partners. High levels of trust and the active participation of a regulatory body were found to be significant factors in terms of creating a partnership that benefits all sides.     

Why Do Politicians Intervene in Accounting Regulation? The Role of Ideology and Special Interests

Politicians frequently intervene in the regulation of financial accounting. Evidence from the accounting literature shows that regulatory capture by special interests helps explain these interventions. However, many accounting rules have broad economic or social consequences, such as their effects on income distribution or private sector subsidies. The perception of these consequences varies with a politician's ideology. Therefore, if accounting rules produce those consequences, ideology plausibly spills over and explains a politician's stance on the technical accounting issue, beyond special interest pressure. We use two prominent U.S. political debates about fair value accounting and the expensing of employee stock options to disentangle the role of ideology from special interest pressure. In both debates, ideology explains politicians’ involvement at exactly those points when the debate focuses on the economic consequences of accounting regulation (i.e., bank bailouts and top management compensation). Once the debates focus on more technical issues, connections to special interests remain the dominant force.     

Effects of the institutional environment on public-private partnership (P3) projects: Evidence from Canada

The purpose of this paper is to understand the effects of the institutional environment on project outcomes in order to contribute to the accumulating accounting literature on P3s. Based on an empirical study of Alberta’s institutional environment, using Edmonton’s Anthony Henday Highway P3 projects, we analyze how the: a) political environment enables or disenables P3 outcomes; b) policy/business environment impacts project development and implementation; and c) organizational capacity affects P3 outcomes and vice versa.Adopting a neo-institutionalism perspective and a case study approach, we investigate the effects of the institutional environment on P3 project outcomes. This research is based on 35 semi-structured interviews of public sector executive managers, political actors, senior industry executives, project consultants/advisors, labour union, media specialists, community advocates and public policy analysts in the P3 industry who participated in Alberta’s P3 projects from 2004 to 2016.We find that the institutional environment has significant influence on project performance, and program permanence/continuity. Our study suggests that P3 enabling environments present: 1) relevant P3 policy measures and committed political support by field actors; 2) a path-dependent response to project outcomes; and 3) institutional environment elements that are mutually re-enforcing with synergistic effects.In effect, we document that a strong political leadership support for P3s, a favourable policy environment, and effective organizational capacity are pre-requisite factors for the successful implementation of P3s. Given the unsettled debate about various methodological approaches to value for money (VfM) determination for assessing P3s, we are unsure whether our findings are partly influenced by inconsistent accounting standards for P3s across jurisdictions.Our study highlights critical P3 enabling attributes that would be beneficial to accounting researchers interested in institutional environment studies and co-operative arrangements, accountants, public sector policy managers, regulators, and private sector partners saddled with the task of developing and implementing P3 projects in various institutional and/or contextual settings.     

Government Accounting: An Assessment of Theory, Purposes and Standards

Government accounting and financial reporting aims to protect and manage public money and discharge accountability. These purposes, and the nature of public goods and tax financing, give rise to differences with commercial accounting. This is not yet reflected either in government accounting standards in English–speaking developed nations or in international public sector accounting standards. All of these are heavily influenced by private sector practices, which favour the accrual basis and consolidated reporting. This article argues for a gradual symmetric approach to accruals and a combination of government–wide and fund reporting. The author also proposes some broad accounting principles to promote political and economic accountability.     

关于SDR计价证券市场现状的分析

文章回顾了SDR作为官方清算工具的使用情况及其在私人部门中的应用历史，分析了SDR计价证券的优缺点，指出要扩大SDR的国际储备货币职能，除了要加强各国政治经济利益协调之外，还应充分借鉴欧洲货币单位（ECU）的发展经验，扩大SDR计价证券在私人部门中的应用，提高此类证券二级市场的流动性，从而促进SDR在国际贸易和国际投资方面的使用，并发挥分散美元风险的作用。     

THE IMPACT OF POLITICAL INTERESTS UPON THE FORMULATION OF PERFORMANCE MEASUREMENTS: THE NHS STAR RATING SYSTEM

This study examines the impact of political interests of the Blair Government on the development of the NHS star rating system. It argues that the use of performance measurements (PMs) is not detached from its political context but influenced by institutional interests including in particular those of the Government. The analysis indicates that the formulation of the specifics of PM, and of performance information within the NHS star rating system, was skewed to reflect the political objectives of the Blair Government. PMs are not merely neutral instruments, but, suffused with institutional interests, serve as a coercive mechanism to impose pressures upon the NHS as well as seeking to create a public perception of performance improvement. This study concludes that PMs in the public sector are influenced by the need to serve the political interests of the Government.     

Political competitiveness and the private–public structure of public expenditure: a model and empirics for the Indian States

Studies of government size usually try to identify the factors that explain what parts of economic activity are brought within the public sector and what parts are left strictly in private hands. Modern governments are now so large that the question of what determines the private/public composition, or privateness, of public expenditure is of comparable importance for understanding the role of government in society. In this paper, we use a model of the composition of public budgets to uncover the importance of electoral competitiveness and other factors in the evolution of the privateness of public expenditure across the Indian states. These states vary widely in their socioeconomic characteristics while sharing a common political heritage based on parliamentary government. New measures of public expenditure on private targetable goods and of electoral competitiveness at the Indian state level accompany the paper along with a primer on Indian public finance accounting practices in an Online Appendix. The empirical analysis shows that the degree of privateness in India’s more developed states falls substantially with greater political competition and with rising incomes, while in the less developed states it responds more weakly to these key factors and in some cases even inversely.

     

Risk Capital for a Profitable Public Corporation: Public Dividend Capital or Equity?

The question of whether profitable public corporations should be converted to private, equity capital finance (i.e.'privatized', in current U.K. terminology) or not is arguably the dominant issue in the public sector of the U.K. economy. The present U.K. government has embarked upon a policy of privatization of state industries. This has attracted considerable criticism on the grounds that the government's actions are the product of ideological and short-term fiscal considerations (principally the funding of public expenditure) rather than of carefully considered policy (Heald and Steel, 1981; Heald, 1983, p. 154). This topic is examined in this paper. The discussion is neither partisan nor ideological. Instead, it centres on the technical and economic merits of equity capital versus its public sector proxy, Public Dividend Capital (PDC). This latter form of capital financing has been neglected in recent years, as the major thrust of the public sector debate has addressed the need for equity capital in the nationalized industries. Therefore, the ensuing discussion is not only a critique of the case for introducing private equity capital in state industries, but it is also an assessment of the case for the retention of PDC as a major instrument of finance.     

加强民营经济的制度环境建设

改革开放后,我国民营经济经历了从无到有、从小到大的发展过程.民营经济作为社会主义市场经济的重要组成部分是我国现代化建设的重要力量,但民营经济的发展仍受到多方面的制约,主要是由于我国的社会主义市场经济体制、法律体系、社会保障体系不完善等制度环境因素.贯彻新宪法关于鼓励和支持非公有制经济的发展就是要从制度环境的建设入手,从根本上解决民营经济发展面临的困境.     

Banking deregulation and innovation

We document empirical support for a key micro-level channel—innovation by young, private firms—through which financial sector deregulation affects economic growth. We find that intrastate banking deregulation, which increased the local market power of banks, decreased the level and risk of innovation by young, private firms. In contrast, interstate banking deregulation, which decreased the local market power of banks, increased the level and risk of innovation by young, private firms. These contrasting effects on innovation also translated into contrasting effects on economic growth. Our study suggests that the nature of financial sector deregulation crucially affects its potential benefits to the real economy.