The effect of structural fund spending on the spanish regions: an assessment of the 1994-99 objective 1 CSF

This paper analyzes the growth and employment effects of the 1994-99 Community Support Framework (CSF) for the Objective 1 Spanish regions using a simple supply-side model estimated with a panel of regional data. The results suggest that the impact of the Structural Funds in Spain has been quite sizable, adding around a percentage point to annual output growth in the average Objective 1 region and 0.4 points to employment growth. Over the period 1994-2000, the Framework has resulted in the creation of over 300,000 new jobs and has eliminated 20% of the initial gap in income per capita between the assisted regions and the rest of the country.

The role of central bank operating procedures in an economy with productive government spending

The choice of either the rate of monetary growth or the nominal interest rate as the instrument controlled by monetary authorities has both positive and normative implications for economic performance. We reexamine some of the issues related to the choice of the monetary policy instrument in a dynamic general equilibrium model exhibiting endogenous growth in which a fraction of productive government spending is financed by means of issuing currency. When we evaluate the performance of the two monetary instruments attending to the fluctuations of endogenous variables, we find that the inflation rate is less volatile under nominal interest rate targeting. Concerning the fluctuations of consumption and of the growth rate, both monetary policy instruments lead to statistically equivalent volatilities. Finally, we show that none of these two targeting procedures displays unambiguously higher welfare levels.

Welfare Implications of Public Education Spending Rules

In this paper, we quantitatively assess the welfare implications of alternative public education spending rules. To this end, we employ a dynamic stochastic general equilibrium model in which human capital externalities and public education expenditures, nanced by distorting taxes, enhance the productivity of private education choices. We allow public education spending, as share of output, to respond to various aggregate indicators in an attempt to minimize the market imperfection due to human capital externalities. We also expose the economy to varying degrees of uncertainty via changes in the variance of total factor productivity shocks. Our results indicate that, in the face of increasing aggregate uncertainty, active policy can signi cantly outperform passive policy (i.e. maintaining a constant public education to output ratio) but only when the policy instrument is successful in smoothing the growth rate of human capital.

Balanced Budget Government Spending in a Small Open Regional Economy

This paper investigates the impact of a balanced budget fiscal policy expansion in a regional context within a numerical dynamic general equilibrium model. We take Scotland as an example where, recently, there has been extensive debate on greater fiscal autonomy. In response to a balanced budget fiscal expansion the model suggests that: an increase in current government purchase in goods and services has negative multiplier effects only if the elasticity of substitution between private and public consumption is high enough to move downward the marginal utility of private consumers; public capital expenditure crowds in consumption and investment even with a high level of congestion; but crowding out effects might arise in the short-run if agents are myopic.

The Impacts of Temporary and Anticipated Tourism Spending.

Part of the local economic impact of a major sporting event comes from the associated temporary tourism expenditures. Typically demand-driven Input-Output (IO) methods are used to quantify the impacts of such expenditures. However, IO modelling has specific weaknesses when measuring temporary tourism impacts; particular problems lie in its treatment of factor supplies and its lack of dynamics. Recent work argues that Computable General Equilibrium (CGE) analysis is more appropriate and this has been widely applied. Neglected in this literature however is an understanding of the role that behavioural characteristics and factor supply assumptions play in determining the economic impact of tourist expenditures, particularly where expenditures are temporary (i.e. of limited duration) and anticipated (i.e. known in advance). This paper uses a CGE model for Scotland in which agents can have myopic- or forward-looking behaviours and shows how these alternative specifications affect the timing and scale of the economic impacts from anticipated and temporary tourism expenditure. The tourism shock analysed is of a scale expected for the Commonwealth Games to be held in Glasgow in 2014. The model shows how “pre-shock” and “legacy” effects – impacts before and after the shock – arise and their quantitative importance. Using the forward-looking model the paper calculates the optimal degree of pre-announcement.

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.

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.

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.

Do Nasty and Pleasant Surprises Regarding Tax Revenue Explain Spending Drifts ? : The Case of the Swiss Cantons

This article aims to explain the difference between the expenditure reported in governmental end-of-the-year budgets and the amounts previously forecasted in the approved beginning-of-the-year budgets. We measure how political, financial, and institutional variables affect this spending drift. We focus on two much-debated factors, namely, tax revenue budgeting errors and the stringency of fiscal rules. Our econometric approach uses a panel based on the 26 Swiss cantons covering the period of 1980 to 2011. Results suggest that stringent fiscal rules discourage budget overruns, whereas underestimating tax revenue-i.e., a budgetary "pleasant surprise"-offers the opportunity for some overspending.

The political economy of childcare in OECD countries : Explaining cross-national variation in spending and coverage rates

If childcare policy has become topical in most OECD countries over the last ten years or so, actual developments display huge cross-national variations. Countries like Sweden and Denmark spend around 2 per cent of GDP on this service, and provide affordable childcare places to most children below school age. At the other extreme, in Southern Europe, only around 10 per cent of this age group has access to formal daycare. Against this background, this article aims to account for cross-national variations in childcare services. It distinguishes two dependent variables: the coverage rate and the proportion of GDP spent subsidising childcare services. Using a mix of cross-sectional and pooled times-series methods, it tests a series of hypotheses concerning the determinants of the development of this policy. Its main conclusion for the coverage rate is that key factors are public spending and wage dispersion (both positive). For spending, key factors are the proportion of women in parliaments (positive) and spending on age-related policies (negative).

Quand la peur des dépenses incite au gaspillage humain et financier [When the fear of spending incites a human and financial waste!]

Dans les années 80, la crainte de la pléthore médicale imposait des mesures radicales. En 2002, c'est l'angoisse de l'envahisseur européen qui a justifié un moratoire sur l'ouverture de nouveaux cabinets. Aujourd'hui, alors que la Suisse recrute de plus en plus de médecins étrangers pour ses besoins, le Conseiller fédéral Couchepin brandit la menace d'une augmentation des coûts de la santé de 300 millions par an pour justifier une troisième prolongation du moratoire. Ces mesures ont été dictées par la peur d'une explosion des coûts au point de faire perdre de vue la globalité de la situation. Aujourd'hui pourtant, une gestion rationnelle des ressources impose de tout faire pour qu'un maximum de médecins puissent travailler, car la population en a besoin et a déjà beaucoup investi dans leur formation ! Pour y parvenir, la création de postes d'assistanat à temps partiel, l'adaptation urgente des structures d'accueil en garderie et le respect de conditions de travail raisonnables sont des éléments incontournables mais trop souvent négligés par les politiques et les médecins eux-mêmes !

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.

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.