Fiscal foresight and the effects of government spending

We study the effects of government spending by using a structural, large dimensional, dynamic factor model. We find that the government spending shock is non-fundamental for the variables commonly used in the structural VAR literature, so that its impulse response functions cannot be consistently estimated by means of a VAR. Government spending raises both consumption and investment, with no evidence of crowding out. The impact multiplier is 1.7 and the long run multiplier is 0.6.

Tax evasion, technology shocks, and the cyclicality of government revenues

This paper analyzes the behavior of the tax revenue to output ratio over the business cycle. In order to replicate the empirical evidence, we develop a simple model combining the standard Ak growth model with the tax evasion phenomenon. When individuals conceal part of their true income from the tax authority, they face the risk of being audited and hence of paying the corresponding fine. Under the empirically plausible assumptions that the intertemporal elasticity of substitution exhibits a sufficiently small value and that productivity shocks are serially correlated, we show that the elasticity of government revenue with respect to output is larger than one, which agrees with the empirical evidence. This result holds even if the tax system displays flat tax rates. We extend the previous setup to generate larger fiscal deficits when the economy experiences a recession.

Comrades or Culprits? Donor Engagement and Budget Transparency in Aid Dependent Countries

Budget transparency has come to be considered a key aspect of governance. Over the past decade, donors have invested increasing resources in strengthening processes through which budget transparency in developing countries can be enhanced. According to the 2008 Open Budget Index (OBI) Report, however, aid dependency and budget transparency appear to be inversely correlated. This article looks at the role of donor agencies in promoting or preventing budget transparency in aid dependent countries. It analyzes data for a sample of 16 aid-dependent countries included in the OBI, to test some preliminary hypotheses and select six countries for which more detailed findings are then presented. All of these countries have implemented reforms aimed at enhancing budget transparency, with substantial donor support. These, however, often had only limited success, partly because they were not well adapted to the local context, and partly because donors put limited emphasis on improving public access to budget information. Donor efforts were also often offset by other characteristics of donor interventions, namely their fragmentation, lack of transparency, and limited use of program aid modalities such as budget support and pooled sector funding.

Seeds of hope: Assessing the effect of development aid on the reduction of child mortality

The Millennium Declaration (2000) set as one of its targets a substantial reduction in child mortality. This paper studies whether the massive increase in development aid can account for part of the reduction in child mortality observed in developing countries since the year 2000. To do so, we analyze a panel of more than 130 developing countries over the 2000-2008 period. We use the time trend evolution of aid to identify an exogenous source of variation. Total aid has had no statistically significant effect on child mortality. However, a disaggregate analysis identifies certain sectors of aid that have had a significant impact. The effects have been larger in high mortality countries, including Sub-Saharan Africa. Projections based on our estimates strongly support the concern that most countries in that region will miss the Millennium Goals target on child mortality.

E-Government and Online Government-Citizen Interaction

En l'última dècada, les administracions públiques han fet un esforç especial per desenvolupar portals d'administració i oferir serveis en línia. L'objectiu d'aquest article és crear un marc teòric i analític per a investigar els efectes dels nous canals d'interacció basats en la tecnologia entre els governs i els ciutadans en l'estructura organitzativa i les dinàmiques de les administracions públiques i, finalment, en el lliurament de serveis. També assenyala possibles enfocaments metodològics que podrien resultar útils en la recerca futura sobre aquest tema.

E-government and Public Services : a Case Study of the Inter-administrative Portal CAT365. Research report (sythesis document)

Aquest estudi analitza els usos de les TIC a l'administració autonòmica catalana. De forma més específica, l'estudi se centra en la interacció entre l'ús d'un vessant concret de les TIC, la xarxa Internet, per part de l'administració pública, i determinats aspectes centrals d'aquest tipus d'institucions: la seva organització i estructura internes, la provisió de serveis públics o la relació amb altres agents socials. Hem analitzat, doncs, el fenomen del govern electrònic en el marc particular de la Generalitat de Catalunya, estudiant-ne el grau de desenvolupament i penetració, les seves característiques més remarcables i els problemes més importants que s'hi plantegen. El projecte de recerca es concreta en un estudi de cas sobre un projecte d'innovació específic però de gran abast, que es trobava en el moment de realització de l'estudi en la seva primera fase d'implementació: el projecte Administració Oberta de Catalunya (AOC). Concretament ens hem centrat en el vessant d'aquesta iniciativa pública que es concretava en la creació d'un portal interadministratiu a Internet, el portal www.cat365.net, destinat a proveir electrònicament serveis públics de totes les administracions que operen a Catalunya. L'estudi analitza les transformacions internes de l'administració que s'hi poden trobar associades i els elements que les condicionen, tant positivament com negativa. Igualment, intentem analitzem el que aquestes transformacions poden suposar per a la relació entre els ciutadans i les institucions públiques.

Measuring the child mortality impact of official aid for fighting infectious diseases, 2000-2010

Aid for fighting infectious and parasitic diseases has had a statistically significant role in the under-five mortality reduction in the last decade. Point estimates indicate a country average reduction of 1.4 deaths per thousand under fives live-born attributable to aid at its average level in 2000-2010. The effect would be an average drop of 3.3 in the under-five mortality rate at the aid levels of 2010. By components, a dollar per capita spent in fighting malaria has caused the largest average impact, statistically higher than a dollar per capita spent in STD/HIV control. We do not find statistically significant effects of other infectious disease aid, including aid for the control of tuberculosis.

The Effects of government spending on the distribution of consumption

We study the effects of government spending on the distribution of consumption. We find a substantial degree of heterogeneity: consumption increases at the bottom and falls at the top of the distribution, implying a significant temporary reduction of consumption inequality. The effects of the shock display correlations of around -0.7/-0.9 with the percentage of stockholders within the decile. We interpret the results as in line and yielding support to models of limited participation where, while the Ricardian equivalence holds for rich households, for poor household, with no access to capital markets, the Keynesian multiplier is at work.

Fiscal foresight, forecast revisions and the effects of government spending in the open economy

This paper investigates the effects of government spending on the real exchange rate and the trade balance in the US using a new VAR identification procedure based on spending forecast revisions. I find that the real exchange rate appreciates and the trade balance deteriorates after a government spending shock, although the effects are quantitatively small. The findings broadly match the theoretical predictions of the standard Mundell-Fleming model and differ substantially from those existing in literature. Differences are attributable to the fact that, because of fiscal foresight, the government spending is non-fundamental for the variables typically used in open economy VARs. Here, on the contrary, the estimated shock is fundamental.

The European Union Perception of Cuba: From Frustation to Irritation

On Friday May 16, the Ministry of Foreign Affairs of Cuba summoned the newly-appointed charged’affairs of the European Commission in Havana and announced the withdrawal of the application procedure for membership in the Cotonou Agreement of the Africa, Caribbean, and Pacific (ACP) countries, and in fact renouncing to benefit from European development aid.1 In a blistering note published in the Granma official newspaper of the Cuban Communist Party, the government blamed the EU Commission for exerting undue pressure, its alleged alignment with the policies of the United States, and censure for the measures taken by Cuba during the previous weeks.2 In reality, Cuba avoided an embarrasin flat rejection for its application. This was the anti-climatic ending for a long process that can be traced back to the end of the Cold War, in a context where Cuba has been testing alternative grounds to substitute for the overwhelming protection of the Soviet Union

EU cohesion aid to Spain: a data set. Part II: 1994-99 planning period

In this paper we construct a data set on EU cohesion aid to Spain during the planning period 1994-99. The data are disaggregated by region, year and function and attempt to approximate the timing of actual executed expenditure on assisted projects.

Government and the distribution of skills

Individuals' life chances in the future will very much depend on how we invest in our children now. An optimal human capital model would combine a high mean with minimal variance of skills. It is well-established that early childhood learning is key to adult success. The impact of social origins on child outcomes remains strong, and the new role of women poses additional challenges to our conventional nurturing approach to child development. This paper focuses on skill development in the early years, examining how we might best combine family inputs and public policy to invest optimally in our future human capital. I emphasize three issues: one, the uneven capacity of parents to invest in children; two, the impact of mothers' employment on child outcomes; and three, the potential benefits of early pre-school programmes. I conclude that mothers' intra-family bargaining power is decisive for family investments and that universal child care is key if our goal is to arrive at a strong mean with minimal variance.

Policy Making in Divided Government. A Pivotal Actors Model with Party Discipline.

This article presents a formal model of policy decision-making in an institutional framework of separation of powers in which the main actors are pivotal political parties with voting discipline. The basic model previously developed from pivotal politics theory for the analysis of the United States lawmaking is here modified to account for policy outcomes and institutional performances in other presidential regimes, especially in Latin America. Legislators' party indiscipline at voting and multi-partism appear as favorable conditions to reduce the size of the equilibrium set containing collectively inefficient outcomes, while a two-party system with strong party discipline is most prone to produce 'gridlock', that is, stability of socially inefficient policies. The article provides a framework for analysis which can induce significant revisions of empirical data, especially regarding the effects of situations of (newly defined) unified and divided government, different decision rules, the number of parties and their discipline. These implications should be testable and may inspire future analytical and empirical work.

Government Spending and Re-election

Does additional government spending improve the electoral chances of incumbent political parties? This paper provides the first quasi-experimental evidence on this question. Our research design exploits discontinuities in federal funding to local governments in Brazil around several population cutoffs over the period 1982-1985. We find that extra fiscal transfers resulted in a 20% increase in local government spending per capita, and an increase of about 10 percentage points in the re-election probability of local incumbent parties. We also find positive effects of the government spending on education outcomes and earnings, which we interpret as indirect evidence of public service improvements. Together, our results provide evidence that electoral rewards encourage incumbents to spend part of additional revenues on public services valued by voters, a finding in line with agency models of electoral accountability.

Fiat Money, Intrinsic Properties, and Government Transaction Policy

Why do people coordinate on the use of valueless pieces of paper as generally accepted money? A possible answer is that these objects have intrinsic properties that make them better candidates to be used as media of exchange. Another answer stresses the fact that unconvertible fiat money will not easily appear unless there is a centralized institution that favors its use. The main objective of the paper is to analyze these questions. In order to do this, we take a model of commodity money in which fiat money does not play any significant role and modify it to examine under which circumstances fiat money might come to circulate as medium of exchange. Some of the results obtained from the model differ in a rather substantial way from previous related literature.