FISCAL ILLUSION AT THE LOCAL SPHERE: AN EMPIRICAL TEST OF THE FLYPAPER EFFECT USING SOUTH AFRICAN MUNICIPAL DATA1

While South Africa operates a relatively decentralised governance and administrative structure, an important feature of the country's intergovernmental fiscal relations system is the gap that exists between the expenditure responsibilities of sub‐national authorities and their assigned revenue bases. The resulting vertical fiscal imbalance is mainly addressed via significant intergovernmental transfers to provinces and local governments. This factor presents strong a priori grounds for assuming that in the South African context, the heavy dependence of many local governments on intergovernmental transfers may generate fiscal illusion. Despite this, there have not been many empirical studies of fiscal illusion in South Africa's intergovernmental transfer system. This paper extends existing literature on fiscal illusion by using the fiscal year 2005/06 financial and expenditure data from 237 local government authorities in South Africa to evaluate the flypaper variant of the fiscal illusion hypothesis. Empirical results indicate that the marginal effects of municipal own‐source revenues on local expenditure exceed those of intergovernmental transfers. No statistical evidence in support of the flypaper hypothesis within the context of municipal expenditures in South Africa is found.     

Fiscal sustainability across government tiers

This paper analyses how fiscal adjustment comes about when both central and sub-national governments are involved in consolidation. We test sustainability of public debt with a fiscal rule for both federal and regional government. Results for the German Länder show that lower tier governments bear a relatively smaller part of the burden of debt consolidation, if they consolidate at all. Most of the fiscal adjustment occurs via central government debt. In contrast, both the US federal and state levels contribute to consolidation of public finances.     

Geographic versus industry diversification: Constraints matter

This research addresses whether geographic diversification provides benefits over industry diversification in the Eurozone. Our contribution is to show that in the absence of constraints, no empirical evidence is found to support the argument that geographic diversification dominates industry diversification, except in the euro subperiod. With short-selling constraints, however, the tangency portfolio of geographic diversification is not attainable by industry diversification. In out-of-sample geographic minimum variance portfolios outperform industry portfolios in economic terms, although we cannot establish statistical significance.     

The aftermath of the subprime crisis: a clustering analysis of world banking sector

The banking sector has been on the spotlight in both academic and policy circles since the outburst of the subprime bubble. The crisis has its roots in the US, but there were spillover effects around the world. We study the behavior of the banking sector of 40 countries during the period 2007–2010, using a new clustering methodology. Our methodology combines regime switching models in the modeling of longitudinal variations with cluster analysis that identifies groups of countries with similar profiles. Our results show that although there were periods of intense contagion, the impact was uneven among sample countries. The crisis had episodic effects on some countries, while others had severe devaluations after the Lehman Brothers bankruptcy. Finally, a small group of banking systems has plunged into a long severe crisis.     

Ethical judgments and intentions: a multinational study of marketing professionals

A multinational study of marketing professionals was conducted in the US, England, Spain and Turkey. Respondents from these countries were compared on various ethics-related constructs such as idealism, relativism, moral intensity and corporate ethical values. Analyses of variance indicated that moral intensity had a signi ?cant impact on both ethical judgments and behavioral intentions. However, corporate ethical values, an idealistic ethical perspective and a relativistic ethical perspective only partially impacted ethical judgments and intentions. Country differences showed that the US was highest in terms of corporate ethical values while being the lowest in terms of relativism and signi?cantly lower than Spain and Turkey in terms of idealism. Turkey was the highest in terms of both idealism and relativism yet lowest in terms of corporate ethical values. Country differences in terms of moral intensity tended to be situation-speci?c. One managerial implication, for ?rms in all four countries, is that a clear set of corporate policies concerning ethics can positively in?uence the behavioral intentions of employees. It is important that employees do not misinterpret the desires of top management where ethical issues are involved.     

Influence of the EU CAP on terrain morphology and vineyard cultivation in the Priorat region of NE Spain

After the GATT agreements in 1986, which removed the existing external protection on wine market, and with demand developing towards a qualitative level, the European wine sector has been subjected to a continuous transformation to accomplish that main objective. To give producers the chance to bring production into line with market developments and to allow the sector to become permanently competitive, the European Commission established the Council Regulation (EC) No. 1493/1999) on the common market organization in wine, later adopted in the 2003 CAP reform. Among other measures, this regulation finances the restructuring of a large part of present vineyards by adopting new farming systems (EC Council Regulation No. 1227/2000), supporting actions as soil preparation, which includes land levelling and terracing. Traditional vineyard areas in Mediterranean mountain environments, with subsistence agriculture and farming systems based on man and animal labour, have taken advantage of the new market opportunities in the wine sector and of this policy as well, and have changed to a market-oriented farming strategy. It has involved the construction of terraces on hillslopes using heavy machinery with the objective of crop mechanization, which has supposed important changes in soils and landscape. An example of this situation is the Priorat region (Catalonia, NE Spain), where vineyards have been cultivated on hillslopes by human and animal labour since the 12th century. Since the early 1990s the region has been undergoing major changes arising from new wine market opportunities and later by vineyard conversion and restructuring EU policy, which subsidizes up to 50% of the cost. In this paper we consider two aspects of the changes that modern farming systems are causing in the region: (a) land use changes after the coming into practice of the EU vineyard restructuring policy and (b) terrain morphology changes due to land terracing and related geomorphological effects. The results show high terracing rates (22.6–36.1 ha year⁻¹) in the study period (1998–2006), accompanied by huge land movements (a cutting rate of about 5475 m³ ha⁻¹). Bad design of terraces has led to the collapse of benches and borders, affecting about 3.5% of the newly planted area. These effects question the suitability of the EU CAP for vineyard restructuring in Mediterranean mountain environments, revealing that although farmers comply with environmental protection requirements, CAP support is not accomplishing the objectives for which was conceived: the protection of the environment by the reduction of impacts of the agricultural activities.     

The Size and Structure of the World Mutual Fund Industry

This paper analyses the mutual fund industry for 20 countries using a new database of more than 50,000 mutual funds. The results suggest that more developed industries provide more benefits to investors as they diversify more internationally, charge lower annual charges and present more product sophistication. The results also have important policy implications by emphasising the role of competition and contestability in industry development. Fewer barriers to entry are positively associated with a larger industry, and concomitantly with more efficiency in terms of returns and fees.     

ASEAN’s intra-regional tourism demand to Thailand

This paper presents an overview of intra-regional tourism in ASEAN at the beginning of the challenging times that will come with the constitution of the ASEAN Economic Community (AEC). Thailand is chosen as the destination country and the other nine countries are selected as origin. After presenting ASEAN’s intra-regional tourism, the study develops a model of long-run demand. The coefficients are estimated by a time-varying parameters method considering the potential presence of structural breaks, and its implication. The results present and discuss the implications of income, own price, and cross price elasticities. As concluding recommendations, this study suggests that while the region should take advantage of the expansion of the Asian markets due to economic growth and liberalization of ASEAN since 2016, it should use different policies in each origin market.