The drift of public spending towards the elderly: A generational analysis of the trend of public policies in Spain

The tendency for public welfare spending to be increasingly aimed at the elderly has been pointed out for the US and other developed countries. While population ageing is a common trend, it is not obvious why the shift in spending exceeds the trend in ageing, or why per capita spending on the elderly increases.We show that this is the case in Spain, identify the losers from this development, discuss the policies that underlie this trend, and propose adjustments based on Musgrave s fixed proportions rule as an inter-generationally fair distribution.

Authoritarian Responses to Foreign Pressure: Spending, Repression, and Sanctions

This paper explores how international sanctions affect authoritarian rulers’ decisions concerning repression and public spending composition, and how different authoritarian rulers respond to foreign pressure. If sanctions are assumed to increase the price of loyalty to the regime, then rulers whose budgets are not severely constrained by sanctions will tend to increase spending in those categories that most benefit their core support groups. In contrast, when constraints are severe due to reduced aid and trade, dictators are expected to greatly increase their levels of repression. Using data on regime types, public expenditures and spending composition (1970–2000) as well as on repression levels (1976–2001), we show that the empirical patterns conform well to our theoretical expectations. Single-party regimes, when targeted by sanctions, increase spending on subsidies and transfers which largely benefit more substantial sectors of the population and especially the urban classes. Likewise, military regimes increase their expenditures on goods and services, which include military equipment and soldiers’ and officers’ wages. Conversely, personalist regimes reduce spending in all categories, especially capital expenditures, while increasing repression much more than other regime types when targeted by sanctions.

Asessing public policies. The case of education in Europe and the interaction between personal and institutional factors

The paper deals with the comparative study of European citizens' satisfaction with the state of education in their respective countries. Individual and contextual effects are tested applying multilevel analysis. The results show that educational public policies (level of decentralization, degree of comprehensiveness and public spending) as well as the students' social environment (socioeconomic and cultural status) have a sound impact on the opinions about the state of education.

Asessing public policies. The case of education in Europe and the interaction between personal and institutional factors

The paper deals with the comparative study of European citizens satisfaction with thestate of education in their respective countries. Individual and contextual effects aretested applying multilevel analysis. The results show that educational public policies(level of decentralization, degree of comprehensiveness and public spending) as well asthe students social environment (socioeconomic and cultural status) have a soundimpact on the opinions about the state of education.

Redistribution and subsidies for higher education

The financing of higher education through public spending imposes a transfer of resources from taxpayers to university students and their parents. We provide an explanation for this phenomenon. Those who attend higher education will earn more income in the future and will pay more taxes. People whose children do not attend higher education, however should agree to help pay the cost of such education, providing that the taxes are sufficiently high to ensure that there will be an adequate redistribution in favor of their own children at some time in the future.

Environmental factors and social entrepreneurship

Social entrepreneurship has been a subject of growing interest by academics and governments, however little still being known about environmental factors that affect this phenomenon. The main objective of this study is to analyze how these factors affect social entrepreneurial activity, in the light of the institutional economic theory as the conceptual framework. Using linear regression analysis for a sample of 49 countries, is studied the impact of informal institutions (social needs, societal attitudes and education) and formal institutions (public spending, access to finance and governance effectiveness) on social entrepreneurial activity. The findings suggest that while societal attitudes increase the rates of social entrepreneurship, public spending has a negative relationship with this phenomenon. Finally, the empirical evidence found could be useful for the definition of government policies on promoting social entrepreneurship.

Rational Partisan Theory with fiscal policy and an independent central bank

The empirical evidence testing the validity of the rational partisan theory (RPT) has been mixed. In this article, we argue that the inclusion of other macroeconomic policies and the presence of an independent central bank can partly contribute to explain this inconclusiveness. This article expands Alesina s (1987) RPT model to include an extra policy and an independent central bank. With these extensions, the implications of RPT are altered signi ficantly. In particular, when the central bank is more concerned about output than public spending (an assumption made by many papers in this literature), then the direct relationship between in flation and output derived in Alesina (1987) never holds. Keywords: central bank, conservativeness, political uncertainty. JEL Classi fication: E58, E63.

Intergovernmental Transfers and Elementary Education: Quasi-Experimental Evidence from Brazil

Whether providing additional resources to local communities leads to improved public services and better outcomes more generally, given existing management capacity and incentive and accountability structures, is an unresolved yet important question for public policy. This paper uses a regression-discontinuity design to evaluate the effect of unrestricted fiscal transfers on local spending (including on education), schooling and learning in Brazil. Results show that transfers increase local public spending almost one for one with no evidence of crowding out own revenue or other revenue sources. Extra per capita transfers of 1000 Reais lead to about 0.42 additional years of elementary schooling and student literacy rates increase by about 5.6 percentage points on average. Part of this effect arises through higher teacher-student ratios in municipal elementary school systems. Results also suggest that additional resources have stronger effects in more rural and less developed parts of Brazil.

On Globalization and the Growth of Governments

This paper investigates the relationship between trade openness and the size of government, both theoretically and empirically. We show that openness can increase the size of governments through two channels: (1) a terms of trade externality, whereby trade lowers the domestic cost of taxation and (2) the demand for insurance, whereby trade raises risk and public transfers. We provide a unified framework for studying and testing these two mechanisms. First, we show how their relative strength depends on a key parameter, the elasticity of substitution between domestic and foreign goods. Second, while the terms of trade externality leads to inefficiently large governments, the increase in public spending due to the demand for insurance is optimal. We show that large volumes of trade may result in welfare losses if the terms of trade externality is strong enough while small volumes of trade are always beneficial. Third, we provide new evidence on the positive association between openness and the size of government and test whether it is consistent with the terms of trade externality or the demand for insurance. Our findings suggest that the positive relationship is remarkably robust and that the terms of trade externality may be the driving force behind it, thus raising warnings that globalization may have led to inefficiently large governments.

Social capital, government expenditures, and growth

Countries with greater social capital have higher economic growth. We show that socialcapital is also highly positively correlated across countries with government expenditureon education. We develop an infinite-horizon model of public spending and endogenousstochastic growth that explains both facts through frictions in political agency whenvoters have imperfect information. In our model, the government provides servicesthat yield immediate utility, and investment that raises future productivity. Voters aremore likely to observe public services, so politicians have electoral incentives to underprovidepublic investment. Social capital increases voters' awareness of all governmentactivity. As a consequence, both politicians' incentives and their selection improve.In the dynamic equilibrium, both the amount and the efficiency of public investmentincrease, permanently raising the growth rate.

Social security and democracy

Many political economic theories use and emphasize the process of votingin their explanation of the growth of Social Security, governmentspending, and other public policies. But is there an empirical connectionbetween democracy and Social Security program size or design? Using somenew international data sets to produce both country-panel econometricestimates as well as case studies of South American and southern Europeancountries, we find that Social Security policy varies according toeconomic and demographic factors, but that very different politicalhistories can result in the same Social Security policy. We find littlepartial effect of democracy on the size of Social Security budgets, onhow those budgets are allocated, or how economic and demographic factorsaffect Social Security. If there is any observed difference, democraciesspend a little less of their GDP on Social Security, grow their budgetsa bit more slowly, and cap their payroll tax more often, than doeconomically and demographically similar nondemocracies. Democracies andnondemocracies are equally likely to have benefit formulas inducingretirement and, conditional on GDP per capita, equally likely to induceretirement with a retirement test vs. an earnings test.

Gender gaps in policy making: Evidence from direct democracy in Switzerland

In spite of increasing representation of women in politics, little is known about their impact onpolicies. Comparing outcomes of parliaments with different shares of female members does not identifytheir causal impact because of possible differences in the underlying electorate. This paper usesa unique data set on voting decisions to sheds new light on gender gaps in policy making. Ouranalysis focuses on Switzerland, where all citizens can directly decide on a broad range of policiesin referendums and initiatives. We show that there are large gender gaps in the areas of health,environmental protection, defense spending and welfare policy which typically persist even conditionalon socio-economic characteristics. We also find that female policy makers have a substantial effect onthe composition of public spending, but a small effect on the overall size of government.

Financing local development: Quasi-experimental evidence from municipalities in Brazil, 1980-1991

This paper uses a regression discontinuity design to estimate the impact of additional unrestrictedgrant financing on local public spending, public service provision, schooling, literacy, andincome at the community (municipio) level in Brazil. Additional transfers increased local publicspending per capita by about 20% with no evidence of crowding out own revenue or otherrevenue sources. The additional local spending increased schooling per capita by about 7% andliteracy rates by about 4 percentage points. The implied marginal cost of schooling -accountingfor corruption and other leakages- amounts to about US$ 126, which turns out to be similar tothe average cost of schooling in Brazil in the early 1980s. In line with the effect on human capital,the poverty rate was reduced by about 4 percentage points, while income per capita gains werepositive but not statistically significant. Results also suggest that additional public spending hadstronger effects on schooling and literacy in less developed parts of Brazil, while poverty reductionwas evenly spread across the country.

Openness, government size and the terms of trade

This paper investigates the relationship between trade openness and the size of government, both theoretically and empirically. We show that openness can increase the size of governments through two channels: (1) a terms of trade externality, whereby trade lowers the domestic cost of taxation and (2) the demand for insurance, whereby trade raises risk and public transfers. We provide a unified framework for studying and testing these two mechanisms. First, we show how their relative strength depends on a key parameter, the elasticity of substitution between domestic and foreign goods. Second, while the terms of trade externality leads to inefficiently large governments, the increase in public spending due to the demand for insurance is optimal. We show that large volumes of trade may result in welfare losses if the terms of trade externality is strong enough while small volumes of trade are always beneficial. Third, we provide new evidence on the positive association between openness and the size of government and test whether it is consistent with the terms of trade externality or the demand for insurance. Our findings suggest that the positive relationship is remarkably robust and that the terms of trade externality may be the driving force behind it, thus raising warnings that globalization may have led to inefficiently large governments.

Social spending and demographics: The role of public policies in the intergenerational redistribution of income. Empirical evidence from Spain and Catalonia

The demographic shift underway in Southern Europe requires a revision of some of the fundamental principles of the traditional welfare state. We analyze the evolution of several aspects of welfare and social expenditure over the last two decades. We find that in the context of the present demographic changes and real estate boom current social and pension policy leads to a new distribution of benefits and burdens which is highly intergenerationally unequal. We argue for a revised definition of public policy based on Musgrave's proposition as a possible rule for an intergenerationally fair distribution.