The effects of poor financial information systems on the long term sustainability of local public services. Empirical evidence from the Catalan Municipalities

In this paper we describe the existence of financial illusion in public accountingand we comment on its effects for the future sustainability of local publicservices. We relate these features to the lack of incentives amongst publicmanagers for improving the financial reporting and thus management of publicassets. Financial illusion pays off for politicians and managers since it allowsfor larger public expenditure increases and managerial slack, these beingarguments in their utility functions. This preference is strengthen by the shorttime perspective of politically appointed public managers. Both factors runagainst public accountability. This hypothesis is tested for Spain by using anunique sample. We take data from around forty Catalan local authorities withpopulation above 20,000 for the financial years 1993-98. We build this databasis from the Catalan Auditing Office Reports in a way that it can be linkedto some other local social and economic variables in order to test ourassumptions. The results confirm that there is a statistical relationship between the financialillusion index (FI as constructed in the paper) and higher current expenditure.This reflects on important overruns and increases of the delay in payingsuppliers, as well as on a higher difficulties to face capital finance. Mechanismsfor FI creation have to do among other factors, with delays in paying suppliers(and thereafter higher future financial costs per unit of service), no adequateprovision for bad debts and lack of appropriate capital funding either forreposition or for new equipments. For this, it is crucial to monitor the way inwhich capital transfers are accounted in local public sheet balances. As a result,for most of the Municipalities we analyse, the funds for guaranteeing continuityand sustainability of public services provision are today at risk.Given managerial incentives at present in public institutions, we conclude thatpublic regulation recently enforced for assuring better information systems inlocal public management may not be enough to change the current state of affairs.

The political cost of reforms

This paper formalizes in a fully-rational model the popular idea that politiciansperceive an electoral cost in adopting costly reforms with future benefits and reconciles it with the evidence that reformist governments are not punished by voters.To do so, it proposes a model of elections where political ability is ex-ante unknownand investment in reforms is unobservable. On the one hand, elections improve accountability and allow to keep well-performing incumbents. On the other, politiciansmake too little reforms in an attempt to signal high ability and increase their reappointment probability. Although in a rational expectation equilibrium voters cannotbe fooled and hence reelection does not depend on reforms, the strategy of underinvesting in reforms is nonetheless sustained by out-of-equilibrium beliefs. Contrary tothe conventional wisdom, uncertainty makes reforms more politically viable and may,under some conditions, increase social welfare. The model is then used to study howpolitical rewards can be set so as to maximize social welfare and the desirability of imposing a one-term limit to governments. The predictions of this theory are consistentwith a number of empirical regularities on the determinants of reforms and reelection.They are also consistent with a new stylized fact documented in this paper: economicuncertainty is associated to more reforms in a panel of 20 OECD countries.

Government spending and re-election: Quasi-experimental evidence from Brazilian municipalities

Does additional government spending improve the electoral chances of incumbent politicalparties? This paper provides the first quasi-experimental evidence on this question. Our researchdesign exploits discontinuities in federal funding to local governments in Brazil around severalpopulation cutoffs over the period 1982-1985. We show that extra fiscal transfers resulted in a20% increase in local government spending per capita, and an increase of about 10 percentagepoints in the re-election probability of local incumbent parties. In the context of an agency modelof electoral accountability, as well as existing results indicating that the revenue jumps studiedhere had positive impacts on education outcomes and earnings, these results suggest that expectedelectoral rewards encouraged incumbents to spend additional funds in ways that were valued byvoters.

Should banking supervision and monetary policy tasks be given to different agencies?

This paper adds some new arguments to the thesis that the responsibility forbanking supervision should be assigned to an agency formally separated bythe Central bank. We also provide some additional evidence on the macroand microeconomic performance of OECD countries whose banking systems areclassified according to the regulatory regime in place. We find that theinflation rate is considerably higher and more volatile in countries wherethe Central bank acts as a monopolist in banking supervision. Besides,although banks seem to be more profitable when Central banks supervise them,they incur into higher costs and rely more on deposits with respect to moresophisticated liabilities as a funding source.The data are not definitively in favor of functional separation. However, we argue that the evolution of financial intermediaries, moral hazard problems and especially cost accountability seem to suggest that separation would be a better solution for industrialized countries.We also critically discuss the current arrangement of financial regulationand supervision in the EMU: our proposal is to establish an independentEuropean System of Financial Supervisors (ESFS) structured similarly to theESCB.

Uncertainty, electoral incentives and political myopia

We study the determinants of political myopia in a rational model of electoral accountability where the key elements are informational frictions and uncertainty. We build aframework where political ability is ex-ante unknown and policy choices are not perfectlyobservable. On the one hand, elections improve accountability and allow to keep well-performing incumbents. On the other, politicians invest too little in costly policies withfuture returns in an attempt to signal high ability and increase their reelection probability.Contrary to the conventional wisdom, uncertainty reduces political myopia and may, undersome conditions, increase social welfare. We use the model to study how political rewardscan be set so as to maximise social welfare and the desirability of imposing a one-term limitto governments. The predictions of our theory are consistent with a number of stylised factsand with a new empirical observation documented in this paper: aggregate uncertainty, measured by economic volatility, is associated to better fiscal discipline in a panel of 20 OECDcountries.

Avaluació de necessitats i disseny de la intervenció per a la reintegració social dels delinqüents sexuals d’alt risc

Aquest treball recull les necessitats per la reintegració que presenten els delinqüents sexuals a les presons catalanes i com es poden abordar aquestes mitjançant un model que ha donat bons resultats a altres països: Circles of Support and Accountability (CoSA a partir d'ara). L'objectiu és conèixer com funcionen els Cercles de Suport i Responsabilitat i quins són els requisits necessaris per adaptar aquest model als serveis penitenciaris de Catalunya. Amb aquesta finalitat s'ha fet una anàlisi quantitativa dels principals trets de la població penitenciària catalana, s'ha revisat la bibliografia sobre el model CoSA i s'ha fet observació de camp en la seva aplicació al Regne Unit. També s'ha comptat amb les opinions d'experts i professionals de Catalunya i s'han fet entrevistes a una petita mostra de delinqüents sexuals en règim de semillibertat. Tot i que a Catalunya hi ha programes a les presons per potenciar la rehabilitació dels delinqüents sexuals, la investigació destaca l’important paper del suport social i del manteniment dels canvis del tractament en el medi comunitari com elements clau per la reducció de la reincidència. El model Cercles optimitza l'efecte d'aquests processos i alhora ofereix un model de supervisió que concilia l'objectiu de protecció pública amb la reintegració del delinqüent. De l'estudi de la població penitenciària es conclou que hi ha una part d'interns que es podrien beneficiar d'aquest programa i que el reconeixen com una font important de suport davant les importants dificultats que troben en el procés de retorn a la llibertat. Es proposa un programa CerclesCat adaptat a la realitat del sistema penitenciari català i es descriu el procés d'implementació.

Evaluación de necesidades y diseño de la intervención para la reintegración social de los delincuentes sexuales de alto riesgo

Este trabajo recoge las necesidades para la reintegración que presentan los delincuentes sexuales de las prisiones catalanas y cómo se pueden abordar éstas mediante un modelo que ha dado buenos resultados en otros países: Circles of Support and Accountability (CoSA a partir de ahora). El objetivo es conocer cómo funcionan los Círculos de Apoyo y Responsabilidad y cuáles son los requisitos necesarios para adaptar este modelo a los servicios penitenciarios de Cataluña. Con este fin se ha hecho un análisis cuantitativo de los principales rasgos de la población penitenciaria catalana, se ha revisado la bibliografía sobre el modelo CoSA y se ha hecho observación de campo en su aplicación en el Reino Unido. También se ha contado con las opiniones de expertos y profesionales de Cataluña y se han realizado entrevistas a una pequeña muestra de delincuentes sexuales en régimen de semilibertad. Aunque en Cataluña hay programas en las prisiones para potenciar la rehabilitación de los delincuentes sexuales, la investigación destaca el importante papel del apoyo social y del mantenimiento de los cambios del tratamiento en el medio comunitario como elementos clave para la reducción de la reincidencia. El modelo de Círculos optimiza el efecto de estos procesos, y muestra un modelo de supervisión que concilia el objetivo de protección pública con la reintegración del delincuente. Del estudio de la población penitenciaria se concluye que hay una parte de internos que podrían beneficiarse de este programa y que lo reconocen como una fuente importante de apoyo ante las importantes dificultades que encuentran en el proceso de retorno a la libertad. Se propone un programa CerclesCat adaptado a la realidad del sistema penitenciario catalán y se describe el proceso de implementación.

Avaluació de necessitats i disseny de la intervenció per a la reintegració social dels delinqüents sexuals d’alt risc

Informe executiu de l’estudi d’adaptació "Avaluació de necessitats i disseny de la intervenció per a la reinserció social dels delinqüents sexuals d’alt risc: Adaptació dels Cercles de Suport i Responsabilitat al sistema d’execució penal de Catalunya".

Evaluación de necesidades y diseño de la intervención para la reintegración social de los delincuentes sexuales de alto riesgo

Informe ejecutivo del estudio de adaptación "Evaluación de necesidades y diseño de la intervención para la reinserción social de los delincuentes sexuales de alto riesgo: Adaptación de los Círculos de Apoyo y Responsabilidad al sistema de ejecución penal de Cataluña".

Needs assessment and design of the intervention for high risk sex offenders social reintegration

Executive report of the adaptation study "Needs assessment and design of the intervention for high risk sex offenders social reintegration: Adaptation of the Circles of Support and Accountability to the Penal Enforcement System of Catalonia".

The Institutional, Economic and Social Determinants of Local Government Transparency

Interest in public accountability and government transparency is increasing worldwide. The literature on the determinants of transparency is evolving but is still in its early stages. So far, it has typically focused on national or regional governments while neglecting the local government level. This paper builds on the scarce knowledge available in order to examine the economic, social, and institutional determinants of local government transparency in Spain. We draw on a 2010 survey and the transparency indexes constructed by the NGO Transparency International (Spain) in order to move beyond the fiscal transparency addressed in previous work. In so doing, we broaden the analysis of transparency to the corporate, social, fiscal, contracting, and planning activities of governments. Our results on overall transparency indicate that large municipalities and left-wing local government leaders are associated with better transparency indexes; while the worst results are presented by provincial capitals, cities where tourist activity is particularly important and local governments that enjoy an absolute majority. The analysis of other transparency categories generally shows the consistent impact of these determinants and the need to consider a wider set of variables to capture their effect.