Managing the crises : how did local governments react to the financial crisis in 2008 and what explains the differences ? The case of Swiss municipalities

Swiss municipalities are, to a large extent, responsible for their financial resources. Since these resources primarily depend on income and property taxes from individuals and enterprises, municipality budgets are likely to be directly affected by the current crisis in the financial sector and the economy. This article investigates how municipalities perceived this threat and how they reacted to it. In a nationwide survey conducted at the end of 2009 in all 2596 Swiss municipalities, we asked local secretaries which measures had been launched in order to cope with expected losses in tax income and a possible increase in welfare spending. Did the municipalities rely on Keynesian measures increasing public spending and accepting greater deficits, or did they try to avoid further deficits by using austerity measures and a withdrawal of planned investments? Our results show that only a few municipalities - mainly the bigger ones - expected to be greatly affected by the crisis. Their reactions, however, did not reveal any clear patterns that theory would lead one to expect. Preferences for austerity measures and deficit spending become visible but many municipalities took measures from both theories. The strongest explanatory factors for determining how/why municipalities react are: the municipality's level of affectedness followed by whether or not the municipality belongs to the French-speaking part of the country. Size also has an impact, whereas the strength of the Social Democrat party is negligible. Explaining what kind of measures municipalities are likely to take is more difficult. However, the more a municipality is affected, the more likely it is to stick to austerity measures.

Task force IV: Clinical use of ambulatory blood pressure monitoring. Participants of the 1999 Consensus Conference on Ambulatory Blood Pressure Monitoring

OBJECTIVE: To reach a consensus on the clinical use of ambulatory blood pressure monitoring (ABPM). METHODS: A task force on the clinical use of ABPM wrote this overview in preparation for the Seventh International Consensus Conference (23-25 September 1999, Leuven, Belgium). This article was amended to account for opinions aired at the conference and to reflect the common ground reached in the discussions. POINTS OF CONSENSUS: The Riva Rocci/Korotkoff technique, although it is prone to error, is easy and cheap to perform and remains worldwide the standard procedure for measuring blood pressure. ABPM should be performed only with properly validated devices as an accessory to conventional measurement of blood pressure. Ambulatory recording of blood pressure requires considerable investment in equipment and training and its use for screening purposes cannot be recommended. ABPM is most useful for identifying patients with white-coat hypertension (WCH), also known as isolated clinic hypertension, which is arbitrarily defined as a clinic blood pressure of more than 140 mmHg systolic or 90 mmHg diastolic in a patient with daytime ambulatory blood pressure below 135 mmHg systolic and 85 mmHg diastolic. Some experts consider a daytime blood pressure below 130 mmHg systolic and 80 mmHg diastolic optimal. Whether WCH predisposes subjects to sustained hypertension remains debated. However, outcome is better correlated to the ambulatory blood pressure than it is to the conventional blood pressure. Antihypertensive drugs lower the clinic blood pressure in patients with WCH but not the ambulatory blood pressure, and also do not improve prognosis. Nevertheless, WCH should not be left unattended. If no previous cardiovascular complications are present, treatment could be limited to follow-up and hygienic measures, which should also account for risk factors other than hypertension. ABPM is superior to conventional measurement of blood pressure not only for selecting patients for antihypertensive drug treatment but also for assessing the effects both of non-pharmacological and of pharmacological therapy. The ambulatory blood pressure should be reduced by treatment to below the thresholds applied for diagnosing sustained hypertension. ABPM makes the diagnosis and treatment of nocturnal hypertension possible and is especially indicated for patients with borderline hypertension, the elderly, pregnant women, patients with treatment-resistant hypertension and patients with symptoms suggestive of hypotension. In centres with sufficient financial resources, ABPM could become part of the routine assessment of patients with clinic hypertension. For patients with WCH, it should be repeated at annual or 6-monthly intervals. Variation of blood pressure throughout the day can be monitored only by ABPM, but several advantages of the latter technique can also be obtained by self-measurement of blood pressure, a less expensive method that is probably better suited to primary practice and use in developing countries. CONCLUSIONS: ABPM or equivalent methods for tracing the white-coat effect should become part of the routine diagnostic and therapeutic procedures applied to treated and untreated patients with elevated clinic blood pressures. Results of long-term outcome trials should better establish the advantage of further integrating ABPM as an accessory to conventional sphygmomanometry into the routine care of hypertensive patients and should provide more definite information on the long-term cost-effectiveness. Because such trials are not likely to be funded by the pharmaceutical industry, governments and health insurance companies should take responsibility in this regard.

Policy Credibility and Delegation to Independent Regulatory Agencies: A Comparative Empirical Analysis

Independent regulatory agencies are one of the main institutional features of the 'rising regulatory state' in Western Europe. Governments are increasingly willing to abandon their regulatory competencies and to delegate them to specialized institutions that are at least partially beyond their control. This article examines the empirical consistency of one particular explanation of this phenomenon, namely the credibility hypothesis, claiming that governments delegate powers so as to enhance the credibility of their policies. Three observable implications are derived from the general hypothesis, linking credibility and delegation to veto players, complexity and interdependence. An independence index is developed to measure agency independence, which is then used in a multivariate analysis where the impact of credibility concerns on delegation is tested. The analysis relies on an original data set comprising independence scores for thirty-three regulators. Results show that the credibility hypothesis can explain a good deal of the variation in delegation. The economic nature of regulation is a strong determinant of agency independence, but is mediated by national institutions in the form of veto players.

Street-Level Bureaucracy and E-Government

With the intensive use of information and communication technologies, governments are transforming into e-governments. While public management research has given increased attention to this subject lately, this article reviews the limited literature that deals with the impacts of e-government technologies on street-level bureaucracies. A twofold argument is being developed. First, what can be called the 'curtailment thesis', stressing the reduction or disappearance of frontline policy discretion, is addressed. Second, the 'enablement thesis' gets attention, highlighting how technologies provide frontline workers and citizens with additional action resources. The article concludes with propositions for a future research agenda on the topic.

The Strength of Promissory Representation : What Makes MPs Change their Positions ?

The paper analyses the positional congruence between pre-election statements in the Swiss voting assistance application "smartvote" and post-election behaviour in the Swiss lower house between 2003 and 2009. For this purpose, we selected 34 smartvote questions which subsequently came up in parliament. Unlike previous studies which assessed the program-to-policy linkage of governments or party groups the paper examines the question at the level of individual MPs which seems appropriate for political systems which follow the idea of power dispersion. While the average rate of political congruence is at some 85 percent, a multivariate analysis detects the underlying factors which push or curb a candidate's propensity to change his or her mind once elections are over. The results show that positional changes are more likely if (1) MPs are freshmen, (2) individual voting behaviour is invisible to the public, (3) the vote is not about a party's core issue, (4) the MP belongs to a party which is located in the political centre, and (5) if the pre-election statement is in disagreement with the majority position of the legislative party group. The last-mentioned factor is paramount: the farer away a candidate's pre-election profile from his or her party is located, the weaker turns out to be the electoral link of promissory representation.

Three essays in international finance

Executive Summary The first essay of this dissertation investigates whether greater exchange rate uncertainty (i.e., variation over time in the exchange rate) fosters or depresses the foreign investment of multinational firms. In addition to the direct capital financing it supplies, foreign investment can be a source of valuable technology and know-how, which can have substantial positive effects on a host country's economic growth. Thus, it is critically important for policy makers and central bankers, among others, to understand how multinationals base their investment decisions on the characteristics of foreign exchange markets. In this essay, I first develop a theoretical framework to improve our knowledge regarding how the aggregate level of foreign investment responds to exchange rate uncertainty when an economy consists of many firms, each of which is making decisions. The analysis predicts a U-shaped effect of exchange rate uncertainty on the total level of foreign investment of the economy. That is, the effect is negative for low levels of uncertainty and positive for higher levels of uncertainty. This pattern emerges because the relationship between exchange rate volatility and 'the probability of investment is negative for firms with low productivity at home (i.e., firms that find it profitable to invest abroad) and the relationship is positive for firms with high productivity at home (i.e., firms that prefer exporting their product). This finding stands in sharp contrast to predictions in the existing literature that consider a single firm's decision to invest in a unique project. The main contribution of this research is to show that the aggregation over many firms produces a U-shaped pattern between exchange rate uncertainty and the probability of investment. Using data from industrialized countries for the period of 1982-2002, this essay offers a comprehensive empirical analysis that provides evidence in support of the theoretical prediction. In the second essay, I aim to explain the time variation in sovereign credit risk, which captures the risk that a government may be unable to repay its debt. The importance of correctly evaluating such a risk is illustrated by the central role of sovereign debt in previous international lending crises. In addition, sovereign debt is the largest asset class in emerging markets. In this essay, I provide a pricing formula for the evaluation of sovereign credit risk in which the decision to default on sovereign debt is made by the government. The pricing formula explains the variation across time in daily credit spreads - a widely used measure of credit risk - to a degree not offered by existing theoretical and empirical models. I use information on a country's stock market to compute the prevailing sovereign credit spread in that country. The pricing formula explains a substantial fraction of the time variation in daily credit spread changes for Brazil, Mexico, Peru, and Russia for the 1998-2008 period, particularly during the recent subprime crisis. I also show that when a government incentive to default is allowed to depend on current economic conditions, one can best explain the level of credit spreads, especially during the recent period of financial distress. In the third essay, I show that the risk of sovereign default abroad can produce adverse consequences for the U.S. equity market through a decrease in returns and an increase in volatility. The risk of sovereign default, which is no longer limited to emerging economies, has recently become a major concern for financial markets. While sovereign debt plays an increasing role in today's financial environment, the effects of sovereign credit risk on the U.S. financial markets have been largely ignored in the literature. In this essay, I develop a theoretical framework that explores how the risk of sovereign default abroad helps explain the level and the volatility of U.S. equity returns. The intuition for this effect is that negative economic shocks deteriorate the fiscal situation of foreign governments, thereby increasing the risk of a sovereign default that would trigger a local contraction in economic growth. The increased risk of an economic slowdown abroad amplifies the direct effect of these shocks on the level and the volatility of equity returns in the U.S. through two channels. The first channel involves a decrease in the future earnings of U.S. exporters resulting from unfavorable adjustments to the exchange rate. The second channel involves investors' incentives to rebalance their portfolios toward safer assets, which depresses U.S. equity prices. An empirical estimation of the model with monthly data for the 1994-2008 period provides evidence that the risk of sovereign default abroad generates a strong leverage effect during economic downturns, which helps to substantially explain the level and the volatility of U.S. equity returns.

The Institutional Foundations of Regulatory Capitalism: The Diffusion of Independent Regulatory Agencies in Western Europe

This article studies the diffusion of the main institutional feature of regulatory capitalism, namely, independent regulatory agencies. While only a few such authorities existed in Europe in the early 1980s, by the end of the twentieth century they had spread impressively across countries and sectors. The analysis finds that three classes of factors (bottom-up, top-down, and horizontal) explain this trend. First, the establishment of independent regulatory agencies was an attempt to improve credible commitment capacity when liberalizing and privatizing utilities and to alleviate the political uncertainty problem, namely, the risk to a government that its policies will be changed when it loses power. Second, Europeanization favored the creation of independent regulators. Third, individual decisions were interdependent, as governments were influenced by the decisions of others in an emulation process where the symbolic properties of independent regulators mattered more than the functions they performed.

The Formal Independence of Regulators: A Comparison of 17 Countries and 7 Sectors

This article seeks to explain the pattern of delegation to independent regulatory agencies in Western Europe. Two types of arguments are advanced to explain variations in the formal independence of regulators. Firstly, the need for governments to increase their credible commitment capacity may lead them to delegate regulation to an agency that is partly beyond their direct control. Secondly, delegation may be a response to the political uncertainty problem, which arises when governments are afraid of being replaced by another coalition with different preferences, which could decide to change existing policy choices. In addition, veto players may constitute a functional equivalent of delegation, since they influence policy stability and therefore tend to mitigate both the credibility and the political uncertainty problems. These arguments are consistent with the results of the empirical analysis of the formal independence of regulators in seventeen countries and seven sectors.

Corruption and decentralization : what economists have to say about it

This paper deals with both theoretical and empirical aspects of the link between corruption and decentralization in both developing and emerging countries. Only mixed results can be drawn from the literature. Decentralization can help discipline "predative" governments, but only under certain conditions. Indeed, it depends on fiscal arrangements and political features that are likely to be different between countries. The way incentives to local governments are designed by the central governments also plays an essential role.

Topics in public finance: social security and taxation

Summary The field of public finance focuses on the spending and taxing activities of governments and their influence on the allocation of resources and distribution of income. This work covers in three parts different topics related to public finance which are currently widely discussed in media and politics. The first two parts deal with issues on social security, which is in general one of the biggest spending shares of governments. The third part looks at the main income source of governments by analyzing the perceived value of tax competition. Part one deals with the current problem of increased early retirement by focusing on Switzerland as a special case. Early retirement is predominantly considered to be the result of incentives set by social security and the tax system. But the Swiss example demonstrates that the incidence of early retirement has dramatically increased even in the absence of institutional changes. We argue that the wealth effect also plays an important role in the retirement decision for middle and high income earners. An actuarially fair, but mandatory funded system with a relatively high replacement rate may thus contribute to a low labor market participation rate of elderly workers. We provide evidence using a unique dataset on individual retirement decisions in Swiss pension funds, allowing us to perfectly control for pension scheme details. Our findings suggest that affordability is a key determinant in the retirement decisions. The higher the accumulated pension capital, the earlier men, and to a smaller extent women, tend to leave the workforce. The fact that early retirement has become much more prevalent in the last 15 years is a further indicator of the importance of a wealth effect, as the maturing of the Swiss mandatory funded pension system over that period has led to an increase in the effective replacement rates for middle and high income earners. Part two covers the theoretical side of social security. Theories analyzing optimal social security benefits provide important qualitative results, by mainly using one general type of an economy. Economies are however very diverse concerning numerous aspects, one of the most important being the wealth level. This can lead to significant quantitative benefit differences that imply differences in replacement rates and levels of labor supply. We focus on several aspects related to this fact. In a within cohort social security model, we introduce disability insurance with an imperfect screening mechanism. We then vary the wealth level of the model economy and analyze how the optimal social security benefit structure or equivalently, the optimal replacement rates, changes depending on the wealth level of the economy, and if the introduction of disability insurance into a social security system is preferable for all economies. Second, the screening mechanism of disability insurance and the threshold level at which people are defined as disabled can differ. For economies with different wealth levels, we determine for different thresholds the screening level that maximizes social welfare. Finally, part three turns to the income of governments, by adding an element to the controversy on tax competition versus tax harmonization.2 Inter-jurisdictional tax competition can generate at least two potential benefits or costs: On a public level, tax competition may result in a lower or higher efficiency in the production of public services. But there is also a more private benefit in the form of an option for individuals to move to a community with a lower tax rate in the future. To explore the value citizens attach to tax competition we analyze a unique popular vote for a complete tax harmonization between communities in the third largest Swiss canton, Vaud. Although a majority of voters would have seemingly benefited from replacing the current tax rate by a revenue-neutral average tax rate, the proposal was rejected by a large margin. Our estimates suggest that the estimated combined perceived benefit from tax competition is in the range of 10%.

Preface to the Rostock Debate on Demographic Change

The first Rostock Debate on Demographic Change, which took place on February 21, 2006, centered on the following question: Should governments in Europe push much more aggressively for gender equality to raise fertility? The four debaters were Laurent Toulemon from the Institut National d'Etudes Demograhiques (France), Dimiter Philipov from the Vienna Institute of Demography (Austria), Livia Olah from Stockholm University (Sweden), and Gerda Neyer from the Max Planck Institute (Germany).

Malaria: une espèce en voie de disparition [Malaria: an endangered species?].

The implementation at scale of preventive measures and the use of effective treatments in populations living in endemic areas has led to a drastic reduction of the burden of malaria in all continents. The considerable investment of international agencies to support local governments in the fight against malaria allows hoping to achieve the millennium goals for malaria and child mortality in several countries. Malaria elimination, and even eradication becomes a realistic objective, especially so because a vaccine may be soon available to complement the armamentarium. For travelers, the tendency will be to reduce the number of countries where chemoprophylaxis or stand-by treatment is recommended and to insist on the rigorous use of measures to prevent mosquito bites such as repellents and insecticide-impregnated bednets.

Evidence-based Economic Policy - Three Essays in Applied Microeconometrics

Over thirty years ago, Leamer (1983) - among many others - expressed doubts about the quality and usefulness of empirical analyses for the economic profession by stating that "hardly anyone takes data analyses seriously. Or perhaps more accurately, hardly anyone takes anyone else's data analyses seriously" (p.37). Improvements in data quality, more robust estimation methods and the evolution of better research designs seem to make that assertion no longer justifiable (see Angrist and Pischke (2010) for a recent response to Leamer's essay). The economic profes- sion and policy makers alike often rely on empirical evidence as a means to investigate policy relevant questions. The approach of using scientifically rigorous and systematic evidence to identify policies and programs that are capable of improving policy-relevant outcomes is known under the increasingly popular notion of evidence-based policy. Evidence-based economic policy often relies on randomized or quasi-natural experiments in order to identify causal effects of policies. These can require relatively strong assumptions or raise concerns of external validity. In the context of this thesis, potential concerns are for example endogeneity of policy reforms with respect to the business cycle in the first chapter, the trade-off between precision and bias in the regression-discontinuity setting in chapter 2 or non-representativeness of the sample due to self-selection in chapter 3. While the identification strategies are very useful to gain insights into the causal effects of specific policy questions, transforming the evidence into concrete policy conclusions can be challenging. Policy develop- ment should therefore rely on the systematic evidence of a whole body of research on a specific policy question rather than on a single analysis. In this sense, this thesis cannot and should not be viewed as a comprehensive analysis of specific policy issues but rather as a first step towards a better understanding of certain aspects of a policy question. The thesis applies new and innovative identification strategies to policy-relevant and topical questions in the fields of labor economics and behavioral environmental economics. Each chapter relies on a different identification strategy. In the first chapter, we employ a difference- in-differences approach to exploit the quasi-experimental change in the entitlement of the max- imum unemployment benefit duration to identify the medium-run effects of reduced benefit durations on post-unemployment outcomes. Shortening benefit duration carries a double- dividend: It generates fiscal benefits without deteriorating the quality of job-matches. On the contrary, shortened benefit durations improve medium-run earnings and employment possibly through containing the negative effects of skill depreciation or stigmatization. While the first chapter provides only indirect evidence on the underlying behavioral channels, in the second chapter I develop a novel approach that allows to learn about the relative impor- tance of the two key margins of job search - reservation wage choice and search effort. In the framework of a standard non-stationary job search model, I show how the exit rate from un- employment can be decomposed in a way that is informative on reservation wage movements over the unemployment spell. The empirical analysis relies on a sharp discontinuity in unem- ployment benefit entitlement, which can be exploited in a regression-discontinuity approach to identify the effects of extended benefit durations on unemployment and survivor functions. I find evidence that calls for an important role of reservation wage choices for job search be- havior. This can have direct implications for the optimal design of unemployment insurance policies. The third chapter - while thematically detached from the other chapters - addresses one of the major policy challenges of the 21st century: climate change and resource consumption. Many governments have recently put energy efficiency on top of their agendas. While pricing instru- ments aimed at regulating the energy demand have often been found to be short-lived and difficult to enforce politically, the focus of energy conservation programs has shifted towards behavioral approaches - such as provision of information or social norm feedback. The third chapter describes a randomized controlled field experiment in which we discuss the effective- ness of different types of feedback on residential electricity consumption. We find that detailed and real-time feedback caused persistent electricity reductions on the order of 3 to 5 % of daily electricity consumption. Also social norm information can generate substantial electricity sav- ings when designed appropriately. The findings suggest that behavioral approaches constitute effective and relatively cheap way of improving residential energy-efficiency.