MASSIVE DIVESTITURE AND PRIVATIZATION LESSONS FROM CHILE

Between 1974 and 1989, the Chilean government privatized 550 state-owned enterprises (SOEs). Before 1974, all but a handful of major corporations were SOEs. About 50 of the largest enterprises privatized during the 1970s fell into government hands again, only to be re-privatized later. This was due partly to the economic and financial crisis affecting most Latin American countries during the early 1980s but also was a consequence of the privatization modes used. This paper analyzes that unique privatization experience so as to extract policy lessons. The analysis focuses on economic conditions, objectives of government policy, privatization modes, and the divestiture effects on employment, fiscal revenues, public sector wealth, spread of ownership, and capital market development.     

NATIONAL ACCOUNTS FOR ANALYSING CREDIT MARKET CONDITIONS

It is only within the last two years that the published United Kingdom accounts have been extended to include sector financial accounts; their use for market analysis is, therefore, still in its infancy. The sectors and sub-sectors distinguished in the financial accounts agree very closely with those recommended by the Working Group on Financial Statistics of the Conference of European Statisticians. A major difference is that in the United Kingdom accounts particular emphasis is placed on the distinction between the public sector and the private sector. For this purpose the public sector consists not only of general government but also includes public corporations (that is, public non-financial corporate enterprises). The classification of assets and liabilities is based on a general list which is also similar to that developed by the Conference of European Statisticians. Because of the large capital formation of public corporations and local authorities, the public sector is normally a substantial borrower from the pirvate sector, although its borrowing requirements fluctuate considerably from quarter to quarter because of the uneven incidence of tax receipts. The personal sector provides about one-third of the total saving of the economy, much of which is in the form of contractual saving—through life assurance and superannuation funds and the repayment of house purchase loans. No direct information is available about transactions in stocks and shares by the personal sector, but it is estimated that the sector is a very large seller of securities and in recent years its sales have amounted to £700 million a year. One factor which is important in the analysis of financial accounts and which is not shown specifically as part of the system is the rate of interest. The proportion of personal saving going into the different forms of short term assets has tended to vary according to the relative rate of interest received. The rate of interest also affects the pattern of borrowing by public authorities. The United Kingdom prepares short term forecasts of national income and of the balance of payments, and also forecasts of the borrowing requirement of the public sector and of the central government in particular. For internal purposes, forecasts are made of the various ways in which the government is expected to finance its borrowing requirement. These forecasts provide a useful framework for considering monetary prospects and are particularly important for showing the relation between the forecasts of the balance of payments and of government borrowing from domestic sources, especially from the banks.     

Does public‐sector employment fully crowd out private‐sector employment?

Employment matters for development because it can raise household income, lower inequality, promote economic growth, and contribute to political stability. Many countries have high rates of public employment, but what effect does this have on overall employment and unemployment rates? This paper investigates if and to what extent public‐sector employment crowds out (reduces) private‐sector employment. In particular, we estimate regressions of unemployment or private‐sector employment on two measures of public‐sector employment. The study uses an especially assembled dataset, which is novel for its coverage of a large sample of developing countries as part of a panel of rich and poor countries. Our results point to full or just about full crowding‐out for the entire sample. Unlike previous cross‐country studies, which were restricted to advanced economies, we are able to show that these results also apply to developing countries, although crowding‐out may not be quite as high as in advanced economies. The results mean that high rates of public employment have an offsetting large negative impact on private employment rates and do not reduce overall unemployment rates. With the qualifier that government activities may help the economy in other ways, our results imply that, rather than creating public‐sector jobs, scarce fiscal resources could be better spent on other developmental needs.     

The size of public employment: An empirical study

Previous empirical studies of government have focused primarily on aggregate financial measures of size. This analysis examines a different measure: the share of public employment in total employment. In empirical tests on OECD countries for 1970 and 1980, the level of public employment is shown to be a clear reflection of voter demand for public goods, electoral support for socialist parties, and political response to the problems of unemployment. In contrast, variables that measure characteristics of the political process, such as degree of government decentralization, strength of interest groups, and voter participation in elections, are not statistically significant.     

THE PUBLIC SECTOR IN FINANCIAL FLOW STATEMENTS: JAPAN'S CASE

One of the most characteristic features of Japan's public sector is the predominant role of the Treasury system, which operates not only budgetary funds of the central government but also various other funds such as Postal Savings Funds and surplus funds of public corporations.
Among the general account and 45 special accounts of the Treasury system, the Foodstuff Control, the Foreign Exchange Fund and the Trust Fund play important roles, both through their intra-governmental transactions and through their transactions with private sectors. Particularly noticeable is the role played by the Trust Fund Bureau, which serves as a financial institution for government agencies. Surplus and accumulated funds in the Postal Savings and other special accounts of the Government are deposited in the Trust Fund Bureau, which employs these funds for intra-governmental ways and means loans, and for government loans and investment programs.
Another feature of Japan's Treasury system is that it deposits all the Treasury funds solely with the Bank of Japan.
The activities of local authorities and local public enterprises are also largely financed by Treasury funds, and are intertwined with the Treasury system.
The statistical systems for monetary and financial flow analysis developed by the Bank of Japan, therefore, place stress on the analysis of flows of Treasury funds, and are based on an institutional sectoring to reflect the flows of funds as they actually take place. One exception is the Monetary Survey compiled in accordance with the IMF formula, which adopts a kind of functional sectoring for international comparison purposes.
In the last three years, Japan's public sector, which had long stood rather neutral in the financial patterns of the economy, has begun to show an increasing financial deficit. With the increasing financial deficit of the sector, the financial patterns of the nation as a whole are undergoing remarkable changes.     

Government size,composition of public spending and economic growth in Brazil

The performance of the fiscal policy is largely affected by the relationship between government size, composition of public spending and economic growth. We use a theoretical framework to find optimal relations among these variables and confront them with a panel data for the Brazilian states. Private capital and government spending are substitute inputs in production as the Brazilian states require provision of public spending to fill gaps in the underdeveloped private sector. Public investment and current government expenditures are combined in fixed ratios in the overall government spending due to strong rigidity of the public budget. The optimal share of public investment is considerably lower than current expenditures, as occurs in developing countries characterized by low economic dynamism. Finally, the average tax burden from the data is below the estimated optimal level, meaning that there is space for increasing tax rate without harming economic growth for some Brazilian states.     

Equilibrium real interest rates and the financial cycle: Empirical evidence for Euro area member countries

We estimate the equilibrium real interest rate for nine Euro area member countries and the Euro area as a whole using quarterly data from 1995 to 2015. We expand the standard model of estimating real equilibrium interest rates to incorporate the financial cycle for the private sector. We show that adding the financial cycle indeed alters the equilibrium real interest rate estimates and, in line with previous studies, that there is a fall in the equilibrium real interest rate over time. Our results indicate that in most member countries the real rate is lower than its equilibrium level. Hence, they should not worry about secular stagnation now. This is because secular stagnation is likely to occur when real interest rates are higher than their equilibrium levels. This result can serve as a starting point for further research in this field, e.g. by adding public sector financial cycles or disentangling the roles of households, corporations and the government.     

Is there a Laffer curve between aggregate output and public sector employment?

This paper develops a model of the relationship between public sector employment, total output and aggregate real demand in market prices, where public employment has a positive productivity effect on private output. Public employment crowds out private employment and output because its increase induces higher wages and taxes. The valuation of government output is also taken into account. While public employment affects total output and aggregate real demand in an a priori ambiguous way, numerical simulations suggest that the relationship may be nonlinear; positive, when public sector is “small” and negative, when it is “large”. Using the annual data from 22 OECD countries over the period 1960–1996 and estimating and testing for threshold models and more commonly used specifications with multiplicative interaction terms give support to this nonlinearity hypothesis between public employment and private sector output. First version received: October 1996/Final version received: April 2000     

Informality,public employment and employment protection in developing countries

This paper proposes an equilibrium matching model for developing countries’ labor markets where the interaction between public, formal private and informal private sectors are taken into account. Theoretical analysis shows that gains from reforms aiming at liberalizing formal labor markets can be annulled by shifts in the public sector employment and wage policies. Since the public sector accounts for a substantial share of employment in developing countries, this approach is crucial to understand the main labor market outcomes of such economies. Wages offered by the public sector increase the outside option value of the workers during the bargaining processes in the formal and informal sectors. It becomes more profitable for workers to search on-the-job, in order to move to these more attractive and more stable types of jobs. The public sector therefore acts as an additional tax for the formal private firms. Using data on workers’ flows from Egypt, we show empirically and theoretically that the liberalization of labor markets plays against informal employment by increasing the profitability, and hence job creations, of formal jobs. The latter effect is however dampened or even sometimes nullified by the increase of the offered wages in the public sector observed at the same time.     

Public investment in developing countries: A blessing or a curse?

This paper analyzes the relationship between public and private investment in developing countries. We set up a simple theoretical model where two countervailing forces coexist. On the one hand, public investment raises the marginal productivity of private capital and leads to potential crowding-in of private investment. On the other hand, weak institutions and restricted access to financing could diminish the positive effects of public investment projects and crowd-out private investment. The empirical results - which exploit both the time series and cross sectional variation in the data using a panel of 116 developing countries with annual observations between 1980 and 2006 - suggest that on average the crowing-out effect dominates. Moreover, we find that this crowing-out effect is dampened (or even reversed) in countries with better institutions - where the marginal productivity of public investment is conceivably higher - and that are more open to international trade and financial flows, such that financing constraints are less binding.     

DEFINED CONTRIBUTION PLANS, DEFINED BENEFIT PLANS, AND THE ACCUMULATION OF RETIREMENT WEALTH

The private pension structure in the United States, once dominated by defined benefit (DB) plans, is currently divided between defined contribution (DC) and DB plans. Wealth accumulation in DC plans depends on a participant's contribution behavior and on financial market returns, while accumulation in DB plans is sensitive to a participant's labor market experience and to plan parameters. This paper simulates the distribution of retirement wealth under representative DB and DC plans. It uses data from the Health and Retirement Study (HRS) to explore how asset returns, earnings histories, and retirement plan characteristics contribute to the variation in retirement wealth outcomes. We simulate DC plan accumulation by randomly assigning individuals a share of wages that they and their employer contribute to the plan. We consider several possible asset allocation strategies, with asset returns drawn from the historical return distribution. Our DB plan simulations draw earnings histories from the HRS, and randomly assign each individual a pension plan drawn from a sample of large private and public defined benefit plans. The simulations yield distributions of both DC and DB wealth at retirement. Average retirement wealth accruals under current DC plans exceed average accruals under private sector DB plans, although DC plans are also more likely to generate very low retirement wealth outcomes. The comparison of current DC plans with more generous public sector DB plans is less definitive, because public sector DB plans are more generous on average than their private sector DB counterparts.     

On the Cost of Opportunistic Behavior in the Public Sector: A General‐Equilibrium Approach

This paper studies the wasteful effect of bureaucracy on the economy by addressing the link between opportunistic behavior of government bureaucrats and the public sector wage bill. In particular, public officials are modeled as individuals competing for a larger share of those public funds. A simple extraction technology in the government administration is introduced in a standard real‐business‐cycle setup augmented with detailed public sector. The model is calibrated to German data for the period 1970–2007. The main findings are: (i) the model performs well vis‐à‐vis the data; (ii) due to the existence of a significant public sector wage premium and the high public sector employment, a substantial amount of working time is spent in opportunistic activities, which, in turn, leads to significant losses in terms of output; and (iii) the model‐based loss measures obtained for the EU‐12 countries are highly correlated to indices of bureaucratic inefficiency.     

Employment and Capital Accumulation in Unionised Labour Markets: Evidence from five south-European countries

This paper analyses the link between employment and capital accumulation in unionised labour markets by using a dynamic monopoly union model. The role of wage setting is also explored within the above context. The empirical analysis is based on annual data from the manufacturing sector of five European countries (France, Greece, Italy, Portugal and Spain). It verifies that capital accumulation has a positive influence on employment. Concerning wages, there is evidence that, in most countries, income opportunities in the public sector play an important role in wage determination. A larger public sector crowds out private investment and employment by serving as a safety net that allows wage setters to push for higher wage demands.     

Public and Private Investments in Greece: Complementary or Substitute ‘Goods’?

This paper investigates whether government investment spending exerts a positive or a negative effect on private investments. Time-series data for Greece as well as the methodology of cointegration suggest that, over the period 1948-80, public investment spending exerted a positive effect on private investments, while over the period 1981-96, the relationship turned out to be negative. Empirical results indicate that the large increase of the public share in the total investment process tended to crowd out private investments and to jeopardize the growth process of the economy.     

On the interaction between public and private capital in economic growth

This paper introduces two forms of interaction between private and public capital in an endogenous growth model in which productive government expenditure takes the form of a stock-variable and public capital is used in part as an input in the production of final output and in part to increase its own supply. While the first form of interaction involves the stocks of the two capital-goods and takes place within the final output sector through the specification of the aggregate production function (Cobb?CDouglas vs. CES), the second one concerns the rates of investment in the two kinds of capital. The share of productive public expenditure devoted to output production can be either exogenous or endogenous. Our results suggest that when this share is exogenous, along the balanced growth path the optimal growth rate of the economy is a positive function of the degree of complementarity between the two forms of investment. When the share of productive public expenditure devoted to output production is endogenous, the public capital share in GDP becomes, along with the model??s preference parameters, an important determinant of the economy??s long run growth. We also find that the optimal growth rate is an increasing function of the elasticity of substitution between public and private capital inputs in goods production, and is independent of the complementarity/substitutability between the two forms of investment.     

我国公共农业R&D投资变化及其国际比较研究

研究了我国公共农业RD投资现状及其变化趋势,并从全球各地区、金砖国家及新兴国家层面进行了国际比较。结果表明,我国公共农业RD投资增长迅猛,投资总额位居金砖国家及新兴国家之首,但投资稳定性不容乐观且投资强度明显不足;公共农业RD投资以政府部门为主,重点扶持农业和农、林、牧、渔服务业。政府应提高公共农业RD投资强度,确保投资稳定性,使资金适量向林业、畜牧业及渔业倾斜,同时鼓励私人部门对公共农业RD进行投资。     

EMPIRICAL IMPACT OF PUBLIC INFRASTRUCTURE ON THE JAPANESE ECONOMY*

We study the impact of public capital investment on individual sectors of the Japanese economy using time‐series data for the period of 1970–1998. We employ a production function approach and also estimate a dynamic VAR/ECM model. We find significant differences in the employment effects, output effects and private investment effects across sectors. Public capital investment has a positive effect on employment in the finance, insurance and real estate (FIRE), manufacturing, construction and utilities sectors; on private investment in the FIRE, agriculture, transportation, trade and services sectors; and on output in the mining, FIRE, trade and manufacturing sectors.     

On measuring the effects of fiscal policy in global financial crisis: Evidences from an export-oriented island economy

Following the 2008 financial crisis, Taiwan implemented various fiscal policies so that they could offset the shocks from the financial crisis. In the present study, we investigate whether these two fiscal policies alleviated the shock generated by the 2008 financial crisis on Taiwan's economy and unemployment. The findings provide that the economic and employment effects generated by the public work investment project were the most substantial in the public sector. By contrast, the economic and employment effects generated by the consumption vouchers policy were the largest in the service sector. These outcomes are closely related to Taiwan's industry structure. The fiscal multiplier of the public investment project and consumer vouchers distribution was 1.94 and 1.47. The evidence in the present study also seems to suggest that the two fiscal policies examined could not induce an effective long-term transformation of Taiwan's economic system.     

Employment and Wages in the Private and Local Government Sectors in a Centralized Fiscal System

This paper discusses the interaction between the local government and private sector in an institutional context consistent with a centralized fiscal system. Under decentralized wage setting in the private sector, the effects of shocks in the two sectors depend on whether private and local public goods are substitutes or complements in the union utility function. Higher wage markup in the local government sector unambiguously decreases government output while the effect on private sector employment is ambiguous. Higher income taxes have ambiguous effects on local government output. Shocks in the private sector can be reinforced through feedback effects from the local government sector. A shift from decentralized to centralized wage setting in the private sector reduces wages and increases employment in both sectors.