Cronyism in Business, Public Sector and Politics

This paper contrasts the incentives for cronyism in business, the public sector and politics within an agency problem model with moral hazard. The analysis is focused on the institutional differences between private, public and political organizations. In business, when facing a residual claimant contract, a chief manager ends up with a relatively moderate …rst-best level of cronyism within a …firm. The institutional framework of the public sector does not allow explicit contracting, which leads to a more severe cronyism problem within public organizations. Finally, it is shown that the nature of political appointments (such that the subordinate's reappointment is conditioned on the chief's re-election) together with implicit contracting makes political cronyism the most extreme case. JEL classifi…cation: D72, D73, D86. Keywords: Cronyism; Meritocracy; Manager; Bureaucrat; Politician.

Cost system design and cost management in the Spanish public sector

Cost systems have been shown to have developed considerably in recent years andactivity-based costing (ABC) has been shown to be a contribution to cost management,particularly in service businesses. The public sector is composed to a very great extentof service functions, yet considerably less has been reported of the use of ABC tosupport cost management in this sector.In Spain, cost systems are essential for city councils as they are obliged to calculate thecost of the services subject to taxation (eg. waste collection, etc). City councils musthave a cost system in place to calculate the cost of services, as they are legally requirednot to profit , from these services.This paper examines the development of systems to support cost management in theSpanish Public Sector. Through semi-structured interviews with 28 subjects within oneCity Council it contains a case study of cost management. The paper contains extractsfrom interviews and a number of factors are identified which contribute to thesuccessful development of the cost management system.Following the case study a number of other City Councils were identified where activity-based techniques had either failed or stalled. Based on the factors identified inthe single case study a further enquiry is reported. The paper includes a summary usingstatistical analysis which draws attention to change management, funding and politicalincentives as factors which had an influence on system success or failure.

Location models in the public sector

The past four decades have witnessed an explosive growth in the field of networkbased facilitylocation modeling. This is not at all surprising since location policy is one of the mostprofitable areas of applied systems analysis in regional science and ample theoretical andapplied challenges are offered. Location-allocation models seek the location of facilitiesand/or services (e.g., schools, hospitals, and warehouses) so as to optimize one or severalobjectives generally related to the efficiency of the system or to the allocation of resources.This paper concerns the location of facilities or services in discrete space or networks, thatare related to the public sector, such as emergency services (ambulances, fire stations, andpolice units), school systems and postal facilities. The paper is structured as follows: first,we will focus on public facility location models that use some type of coverage criterion,with special emphasis in emergency services. The second section will examine models based onthe P-Median problem and some of the issues faced by planners when implementing thisformulation in real world locational decisions. Finally, the last section will examine newtrends in public sector facility location modeling.

Beyond pure public and pure private management models: Partial privatization in the European airport industry

The use of private funding and management is enjoying an increasing trend in airports. The literature has not paid enough attention to the mixed management models in this industry, although many European airports take the form of mixed public-private companies, where ownership is shared between public and private sectors. We examine the determinants of the degree of private participation in the European airport sector. Drawing on a sample of the 100 largest European airports, we estimate a multivariate equation in order to determine the role of airport characteristics, fiscal variables, and political factors on the extent of private involvement. Our results confirm the alignment between public and private interests in partially privatized airports. Fiscal constraints and market attractiveness promote private participation. Integrated governance models and the share of network carriers prevent the presence of private ownership, while the degree of private participation appears to be pragmatic rather than ideological.

Beyond pure public and pure private management models: Mixed firms in the European Airport Industry

The use of private funding and management enjoys an increasing trend in airports. The literature has not paid enough attention to the mixed management models in this industry, although many European airports take the form of mixed firms or Institutional PPP, where ownership is shared between public and private sectors. We examine the determinants of the degree of private participation in the European airport sector. Drawing on a sample of the 100 largest European airports we estimate a multivariate equation in order to determine the role of airport characteristics, fiscal variables and political factors on the extent of private involvement. Our results confirm the alignment between public and private interests in PPPs. Fiscal constraints and market attractiveness promote private participation. Integrated governance models and the share of network carriers prevent the presence of private ownership, while the degree of private participation appears to be pragmatic rather than ideological.

The private and fiscal returns to schooling and the effect of public policies on private incentives to invest in education: a general framework and some results for the EU

This paper develops a comprehensive framework for the quantitative analysis of the private and fiscal returns to schooling and of the effect of public policies on private incentives to invest in education. This framework is applied to 14 member states of the European Union. For each of these countries, we construct estimates of the private return to an additional year of schooling for an individual of average attainment, taking into account the effects of education on wages and employment probabilities after allowing for academic failure rates, the direct and opportunity costs of schooling, and the impact of personal taxes, social security contributions and unemployment and pension benefits on net incomes. We also construct a set of effective tax and subsidy rates that measure the effects of different public policies on the private returns to education, and measures of the fiscal returns to schooling that capture the long-term effects of a marginal increase in attainment on public finances under c

The Private and fiscal returns to schooling and the effect of public policies on private incentives to invest in education: a general framework and some results for the EU

This paper develops a comprehensive framework for the quantitative analysis of the private and fiscal returns to schooling and of the effect of public policies on private incentives to invest in education. This framework is applied to 14 member states of the European Union. For each of these countries, we construct estimates of the private return to an additional year of schooling for an individual of average attainment, taking into account the effects of education on wages and employment probabilities after allowing for academic failure rates, the direct and opportunity costs of schooling, and the impact of personal taxes, social security contributions and unemployment and pension benefits on net incomes. We also construct a set of effective tax and subsidy rates that measure the effects of different public policies on the private returns to education, and measures of the fiscal returns to schooling that capture the long-term effects of a marginal increase in attainment on public finances under conditions that approximate general equilibrium.

The link between public support and private R&D effort: What is the optimal subsidy?

The effectiveness of R&D subsidies can vary substantially depending on their characteristics. Specifically, the amount and intensity of such subsidies are crucial issues in the design of public schemes supporting private R&D. Public agencies determine the intensities of R&D subsidies for firms in line with their eligibility criteria, although assessing the effects of R&D projects accurately is far from straightforward. The main aim of this paper is to examine whether there is an optimal intensity for R&D subsidies through an analysis of their impact on private R&D effort. We examine the decisions of a public agency to grant subsidies taking into account not only the characteristics of the firms but also, as few previous studies have done to date, those of the R&D projects. In determining the optimal subsidy we use both parametric and nonparametric techniques. The results show a non-linear relationship between the percentage of subsidy received and the firms’ R&D effort. These results have implications for technology policy, particularly for the design of R&D subsidies that ensure enhanced effectiveness.

Knowledge of Catalan, public/private sector choice and earnings: Evidence from a double sample selection model

This paper explores the earnings return to Catalan knowledge for public and private workers in Catalonia. In doing so, we allow for a double simultaneous selection process. We consider, on the one hand, the non-random allocation of workers into one sector or another, and on the other, the potential self-selection into Catalan proficiency. In addition, when correcting the earnings equations, we take into account the correlation between the two selectivity rules. Our findings suggest that the apparent higher language return for public sector workers is entirely accounted for by selection effects, whereas knowledge of Catalan has a significant positive return in the private sector, which is somewhat higher when the selection processes are taken into account.

Public-private sector wage differentials by type of contract: evidence from Spain

The article examines public-private sector wage differentials in Spain using microdata from the Structure of Earnings Survey (Encuesta de Estructura Salarial). When applying various decomposition techniques, we find that it is important to distinguish by gender and type of contract. Our results also highlight the presence of a positive wage premium for public sector workers that can be partially explained by their better endowment of characteristics, in particular by the characteristics of the establishment where they work. The wage premium is greater for female and fixed-term employees and falls across the wage distribution, being negative for more highly skilled workers.

Public-private sector wage differentials by type of contract: evidence from Spain

The article examines public-private sector wage differentials in Spain using microdata from the Structure of Earnings Survey (Encuesta de Estructura Salarial). When applying various decomposition techniques, we find that it is important to distinguish by gender and type of contract. Our results also highlight the presence of a positive wage premium for public sector workers that can be partially explained by their better endowment of characteristics, in particular by the characteristics of the establishment where they work. The wage premium is greater for female and fixed-term employees and falls across the wage distribution, being negative for more highly skilled workers.

A never-ending debate: Demand versus supply water policies. A CGE analysis for Catalonia

Water scarcity is a long-standing problem in Catalonia, as there are significant differences in the spatial and temporal distribution of water through the territory. There has consequently been a debate for many years about whether the solution to water scarcity must be considered in terms of efficiency or equity, the role that the public sector must play and the role that market-based instruments should play in water management. The aim of this paper is to use a Computable General Equilibrium (CGE) model to analyze the advantages and disadvantages associated with different policy instruments, from both a supply and a demand viewpoint, which can be applied to water management in Catalonia. We also introduce an ecological sector in our CGE model, allowing us to analyze the environmental impact of the alternative policies simulated. The calibration of the exogenous variables of the CGE model is performed by using a Social Accounting Matrix (SAM) for the Catalan economy with 2001 data. The results suggest that taking into account the principle of sustainability of the resource, the policy debate between supply and demand in water policies is obsolete, and a new combination of policies is required to respect the different values associated with water. Keywords: Water Policies; Computable General Equilibrium Model; Economic Effects; Environmental Effects.

Institutions, Public Debt and Foreign Finance

We study the role of domestic financial institutions in sustaining capital flows to the private and public sector of a country whose government can default on its debt. As in recent public debt crises, in our model public defaults weaken banks' balance sheets, disrupting domestic financial markets. This effect leads to a novel complementarity between private capital inflows and public borrowing, where the former sustain the latter by boosting the government's cost of default. Our key message is that, by shaping the direction of private capital flows, financial institutions determine whether financial integration improves or reduces government discipline. We explore the implications of this complementarity for financial liberalization and debt-financed bailouts of banks. We present some evidence consistent with complementarity.

Are tax subsidies for private medical insurance self-financing? Evidence from a microsimulation model for outpatient and inpatient episodes

This paper analyses whether or not tax subsidies to private medicalinsurance are self-financing by means of a structural approach. Weconstruct a simulation routine based on a microeconometric discretechoice model that allows us to evaluate the impact of premium changeson the utilisation of outpatient and inpatient health care services. Wesimulate the 1999 Spanish tax reform that abolished the tax deductionfor expenditures on private health insurance using a representativesample of the Catalan population. Prior to this reform, foregone taxrevenue arising from deductions after the purchase of private insuranceamounted to 69.2 M. per year. In contrast, the elimination of thesubsidies to private policies is estimated to generate an extra costfor the public sector of about 8.9 M. per year.

The First privatization : selling SOEs and privatizing public monopolies in fascist Italy, 1922-1925

[cat] El primer govern feixista d’Itàlia va aplicar una política de privatització a gran escala entre 1922 i 1925. El govern va privatitzar el monopoli estatal de llumins, el monopoli estatal d’assegurances de vida, va vendre la major part de la xarxa i serveis de telefònica pública a empreses privades, va reprivatitzar el major productor de productes metàl·lics, i va atorgar concessions a empreses privades per construir i explotar autopistes de peatge. Tot i que algunes consideracions ideològiques van poder tenir alguna influència, la privatització va ser usada sobre tot com un instrument polític per construir confiança amb els grans industrials i per augmentar el suport al govern i al Partito Nazionale Fascista. La privatització també va contribuir a equilibrar el pressupost públic, qüestió aquesta que va ser el principal objectiu de la primera fase de la política econòmica feixista.