property tax and fiscal discipline in oecd countries this paper investigates the effects of property taxation on fiscal discipline for a sample of oecd countries over the period 1973 2011 we find that aggregate property taxation in total tax revenues is not statistically correlated with the primary surplus to gdp ratio in contrast a greater reliance on property taxes pertaining to sub national governments contributes to fiscal discipline suggesting that fiscal decentralization should favor responsive tax base instruments

a statistical equilibrium model of competitive firms abstract we find that the empirical density of firm profit rates measured as returns on assets is markedly non gaussian and reasonably well described by an exponential power or subbotin distribution we start from a statistical equilibrium model that leads to a stationary subbotin density in the presence of complex interactions among competitive heterogeneous firms to investigate the dynamics of firm profitability we construct a diffusion process that has the subbotin distribution as its stationary probability density this leads to a phenomenologically inspired interpretation of variations in the shape parameter of the subbotin distribution which essentially measures the competitive pressure in and across industries our findings have profound implications both for the previous literature on the persistence of profits as well as for understanding competition as a dynamic process our main formal finding is that firms idiosyncratic efforts and the tendency for competition to equalize profit rates are two sides of the same coin and that a ratio of these two effects ultimately determines the dispersion of the equilibrium distribution

a comprehensive analysis of expenditure decentralization and of the composition of local public spending sacchi a and salotti s a comprehensive analysis of expenditure decentralization and of the composition of local public spending regional studies many industrialized countries have recently implemented fiscal decentralization reforms assigning more spending responsibility to sub national governments this paper investigates the causes of the decentralization of different categories of public expenditure in 19 developed countries over the period 1980 2006 different models for each of the spending functions under analysis are estimated adopting a general to specific empirical approach results confirm existing findings on the negative link between regional income disparities and expenditure decentralization a similarly negative relationship is found for a set of demographic variables leading to the conclusion that macroeconomic and more importantly political factors are responsible for the recent increase in decentralization finally the analysis is completed by a study of the factors driving sub n

rules transparency and political accountability rules of allocation and redistribution in the public sector are often less contingent on available information than normative theory would suggest this paper offers a political economy explanation under different rules even if the observable outcomes of policies remain the same the informational content which can be extracted by these observations is different less contingent rules allow citizens to gain more information on politicians and this improved information may be used to better select politicians this advantage may overcome the efficiency loss induced by flatter rules 2001 elsevier science b v all rights reserved

on the economic dividend of devolution rodriguez pose a and gill n 2005 on the economic dividend of devolution regional studies 39 405 420 recent political and academic discourse about devolution has tended to stress the economic advantages of the transfer of power from national to subnational institutions this economic dividend arises through devolved administrations ability to tailor policies to local needs generate innovation in service provision through inter territorial competition and stimulate participation and accountability by reducing the distance between those in power and their electorates this paper however outlines two related caveats first there are many forces that accompany devolution and work in an opposite direction devolved governmental systems may carry negative implications in terms of national economic efficiency and equity as well as through the imposition of significant institutional burdens second the economic gains as well as the downsides that devolution may engender are contingent to some

government spending and budget deficits in the industrial economies fiscal policy nouriel roubini and jeffrey sachs this paper examines the evolution of the size of government and of budget deficits in oecd economies we highlight the rapid increase in government spending in the 1970s the sharp rise in budget deficits and public debt after 1973 and the reversal in these trends in the 1980s the increase in the size of government was associated in part with the slowdown in growth after 1973 but also reflected gradual adjustment of the ratio of spending to output towards a long run target which depends on political and institutional characteristics of the economy the political orientation of the government the degree of wage indexation and the degree of stability of the political system such factors also explain the size of budget deficits when faced with an adverse shock subsequent deficit reduction requires a measure of political consensus we note that such consensus is hard to achieve in multi party coalitions in consequence countries with such a political structure tended in consequence countries with such a political structure tended toin consequence countries with such a political structure tended to experience much more rapid increases in their debt gnp ratios

second generation fiscal federalism political aspects of decentralization and economic development summary this essay contributes to second generation fiscal federalism sgff which traces the implications of incentives created by political and fiscal institutions the approach explores how various forms of fiscal federalism work in the presence of political officials who rather than being benevolent social planners face various forms of political incentives the paper focuses on three sets of positive models first it explores self enforcing federalism that is how federal systems are held together given various tendencies for federal systems to become centralized or fall apart second it considers how specific political institutions such as democracy interact with decentralization finally it studies various political impediments to economic growth again highlighting the interaction with decentralization 2013 elsevier ltd all rights reserved

the case for restricting fiscal policy discretion this paper studies the effects of discretionary fiscal policy on output volatility and economic growth using data for 91 countries we isolate three empirical regularities 1 governments that use fiscal policy aggressively induce significant macroeconomic instability 2 the volatility of output caused by discretionary fiscal policy lowers economic growth by more than 0 8 percentage points for every percentage point increase in volatility 3 prudent use of fiscal policy is explained to a large extent by the presence of political constraints and other political and institutional variables the evidence in the paper supports arguments for constraining discretion by imposing institutional restrictions on governments as a way to reduce output volatility and increase the rate of economic growth

does classical competition explain the statistical features of firm growth abstract we propose a statistical equilibrium model where the tendency for competition to equalize profit rates results in an exponential power or subbotin distribution the model supports and extends recent evidence on the laplace distribution of firm growth rates

the influence of decentralized taxes and intergovernmental grants on local spending volatility abstractthe influence of decentralized taxes and intergovernmental grants on local spending volatility regional studies this paper studies what affects the volatility of sub central public spending in 20 organisation for economic co operation and development oecd countries the evidence based on data from 1972 to 2007 shows that the volatility of intergovernmental grants from upper levels is positively associated with the volatility of local expenditure on the other hand the volatility of local tax revenues mainly that of property taxes exerts the opposite effect these findings suggest that making local governments rely more on grants than own tax revenues adversely affects their spending stability allowing them to levy autonomously taxes relying on responsive tax bases provides incentives to smooth their expenditure

does fiscal federalism promote regional inequality an empirical analysis of the oecd 1980 2005 sorens j does fiscal federalism promote regional inequality an empirical analysis of the oecd 1980 2005 regional studies this paper explores the relationship between fiscal federalism understood as institutionalized regional economic self rule and convergence in regional per capita incomes the principal economic argument against fiscal federalism is that unless paired with generous equalization grants it will enhance regional inequalities by reducing inter regional redistribution does the evidence support this claim multilevel spatial regressions on primary sub national jurisdictions in twenty five organisation for economic co operation and development oecd countries show that lower income regions tend to catch up with higher income regions only when they enjoy substantial economic powers indeed there is more convergence across member states of the european union than across regions within almost any of the european union member states fiscal federalism may pose less serious tradeoffs tha

the persistence of profit a new empirical interpretation abstract inferences are drawn about the true coefficients which correspond to sample estimates of a persistence of profit model fitted over a large number of firms this is done by generating simulated sampling distributions for the estimators over various distributional assumptions profits seem to be stationary for all firms with an average short run persistence coefficient of 0 59 higher than most previous estimates long run profit rates differ between firms although by less than is suggested by direct observation of variations in mean profit rates calculated over time short run persistence appears to be inversely related to unsystematic variation in profit

the persistence of profits a european comparison this paper is concerned with modeling the movements in profits of firms over time at the heart of the emp irical model is a latent variables problem which arises from the fact that entry and imitation do not actually have to occur to have an ef fect on profits a solution to this problem is explored and then emp irical results are presented comparing a sample of firms from the uni ted kingdom france and west germany copyright 1988 by royal economic society

the demand for tourism in north east england with special reference to northumbria an empirical analysis abstract this paper examines the trends of tourism in north east england in particular we focus on the area of northumbria to show the potential of tourism for economic development in the region within this analysis we concentrate on the demand for tourism in the region and in particular we are concerned with tourism by uk residents in northumbria domestic tourism the long run relationship between domestic tourism demand and a number of economic factors effecting this demand is considered using the johansen and juselius 1990 1992 multivariate cointegration analysis an error correction model is then proposed for short run forecasting of domestic demand for tourism in northumbria

fiscal decentralization and economic growth abstract fiscal decentralization may indeed have a direct impact on economic growth but the theoretical underpinnings for this relationship remain largely undeveloped a fair summary of the empirical search for a direct relationship between fiscal decentralization and economic growth is that it remains an open question much less attention has been devoted in the literature to the indirect channels through which fiscal decentralization may affect economic growth we argue that much work remains to be done before policy advisors and decision makers can formulate and implement decentralization programs on the basis of improving the rate of economic growth

fiscal decentralization and the size of government a european country empirical analysis this article is an original contribution to the understanding of the relationship between fiscal decentralization and government size using a panel data set of the eu 15 countries we analyse the effect of decentralization on aggregate national and subnational government sizes by separating the long run effects of decentralization from its short run dynamics in the long run tax autonomy reduces central expenditure but increases and to a greater extent subnational public expenditure leading to higher aggregate public expenditure we find also that vertical imbalances tend to increase the sizes of subnational national and aggregate governments

explaining the distribution of firm growth rates empirical analyses on aggregated datasets have revealed a common exponential behavior in the shape of the probability density of corporate growth rates we present clear cut evidence on this topic using disaggregated data we explain the observed regularities proposing a model in which firms ability to take up new business opportunities increases with the number of opportunities already exploited a theoretical result is presented for the limiting case in which the number of firms and opportunities go to infinity moreover using simulations we show that even in a small industry the agreement with asymptotic results is almost complete

persistence of profitability and competition in emerging markets abstract this paper reports on time series analyses of the persistence of profitability of firms in emerging markets its central result is that there is less persistence in developing than in advanced economies the implications for the intensity of competition in emerging markets are examined

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

macroeconomic volatility and welfare in developing countries an introduction macroeconomic volatility both a source and a reflection of underdevelopment is a fundamental concern for developing countries their high aggregate instability results from a combination of large external shocks volatile macroeconomic policies microeconomic rigidities and weak institutions volatility entails a direct welfare cost for risk averse individuals as well as an indirect one through its adverse effect on income growth and development this article provides a brief overview of the recent literature on macroeconomic volatility in developing countries highlighting its causes consequences and possible remedies it then introduces the contributions of a recent conference on the subject sponsored by the world bank and pompeu fabra university barcelona

the cyclical behaviour of fiscal policy evidence from the oecd this paper addresses the topic of cyclicality in scal policy in particular we show that the level of cyclicality varies across spending categories and across oecd countries in line with leading theories of scal cyclicality we show that countries with volatile output and dispersed political power are the most likely to run procyclical scal policies wage government consumption is highlighted as the most important channel by which these variables affect scal cyclicality

long run money demand function in argentina during 1935 1962 evidence from cointegration and error correction models this paper provides a study of argentina s money demand function during 1935 62 and 1946 62 these priods not only involved several important changes in argentina s economy and banking system but also included high and volatile inflation using cointegration tests and error correction moderlling results shows that even in periods of large variability there exists a stationary long run demand function for real m1 and real m2 in argentina error correction models show that there is biddirectional causality between real money stock m1 and m2 and the rate of inflation in both periods real income is found to be exogenous in all relationships thus results presented in this paper provide merit to cagan s form of money demand function during high inflation periods

decentralization as a constraint to leviathan a panel cointegration analysis this paper extends the empirical literature about the effects of fiscal decentralization on the growth of government along three dimensions it distinguishes between the effects of the level of decentralization from the way local governments finance their expenditures common pool versus own resources it uses a panel cointegration approach to separate the long run effects of decentralization from the short run dynamics and it extends and revises the datasets generally used in these empirical analyses the results show that the amount of revenue raised by sub national governments leads to a long term fall in the size of government but grants have the opposite effect in addition a greater decentralization of expenditure leads to greater overall spending when the short term is considered these influences work slowly as the speed of adjustment towards the desired government size is relatively sluggish in addition in the short run there is also a clear effect from the role of local revenue raising powers that stimulates the growth of government these results appear robust to changes in the composition of the variables countries and periods included the sample

the political economy of intergovernmental grants evidence from a maturing democracy we evaluate the impact of political forces in the allocation of intergovernmental grants in portugal as it matured from a young to an established democracy using a large and unexplored dataset we show that political variables condition the granting system and that their importance changed over time while tactical manipulation in the distribution of grants among municipalities seems to exist only in the early years of democracy opportunistic effects are stronger in the latter years we argue that the latter effect is due to a change in the political environment and to the electorate s lack of information on intergovernmental grants

demand for money in sri lanka during the post 1977 period a cointegration and error correction analysis this paper investigates the long run demand for money and short run dynamics of the long run money demand function for sri lanka during the post 1977 period while m1 is cointegrated with real income nominal interest rate short term foreign interest rate and real effective exchange rate m2 is not this suggests that monetary authorities should emphasize the narrow definition of money for monetary control the one year fixed deposits rate is cointegrated with m1 indicating the opportunity cost of holding money although the inflation rate is not cointegrated with m1 it seems to be an important determinant of the demand for m1 in the short run results also suggest that the short term foreign interest rate and the exchange rate can have important implications for the effectiveness of monetary policy monetary authorities must consider the response of domestic money demand to these external factors when formulating future monetary policies

openness country size and government abstract this paper shows that smaller countries have a larger share of public consumption in gdp and are also more open to trade these empirical observations are consistent with recent theoretical models explaining country formation and break up and may account for the observed positive empirical relationship between trade openness and government size

reviving leviathan fiscal federalism and the growth of government this article revisits the influential leviathan hypothesis which pos its that tax competition limits the growth of government spending in decentralized countries i use panel data to examine the effect of fiscal decentralization over time within countries attempting to distinguish between decentralization that is funded by intergovernmental transfers and local taxation first i explore the logic whereby decentralization should restrict government spending if state and local governments have wide ranging authority to set the tax base and rate especially on mobile assets in countries where this is most clearly the case decentralization is associated with smaller government second consistent with theoretical arguments drawn from wel fare economics and positive political economy i show that governments grow faster as they fund a greater portion of public expenditures through intergovernmental transfers

property taxation as incentive for cost control empirical evidence for utility services in norway recent theoretical research suggests that property taxation has incentive effects that can help control cost problems in the public sector the institutional setting in norway allows this first empirical investigation of the incentive effect of property taxation since we can separate between local governments with and without property tax the raw data of the variation in the unit cost level for utilities show that local governments with property tax have about 20 lower unit cost using both linear regression and propensity score matching we are not able to wash out the difference in unit costs our interpretation is that having a visible and controversial local tax related to property stimulates voter interest in local government activities and thereby may help cost control the incentive effect is of interest for the design of fiscal federalism

second generation fiscal federalism the implications of fiscal incentives abstract first generation fiscal federalism fgff studies the performance of decentralized systems under the assumption of benevolent social planners second generation fiscal federalism sgff studies performance based on the fiscal and political incentives facing subnational officials the paper focuses on three aspects of sgff first it considers the design of intergovernmental transfers while fgff emphasizes correcting vertical and horizontal equity sgff emphasizes the importance of fiscal incentives for producing local economic prosperity sgff extends fgff approaches by showing how non linear transfer systems can produce both equalization and high marginal fiscal incentives to produce local economic growth second the paper raises the fiscal incentive approach showing how different tax systems produce different fiscal incentives for political officials to choose policies third the paper discusses the interaction of democracy and fiscal federalism

tax decentralization and local government size this paper investigates the relationship between fiscal federalism and the sizes of local governments while many empirical studies emphasized that grants encourage the growth of local public spending and local taxes constrain it they are more silent regarding the effects of different types of tax autonomy the paper addresses this issue by arguing that tax decentralization as organized on tax bases used only by local governments tax separation rather than on tax base sharing would restrain local public expenditures using an unbalanced panel of oecd countries the key finding is that only property taxes mostly based on a tax separation scheme seem to favor smaller local governments thus while tax decentralization is a necessary condition for limiting the growth of local governments it does not appear sufficient as tax separation schemes among government levels would in fact be required

diversity and redistribution abstract in this paper we analyze the interaction of income and preference heterogeneity in a political economy framework we ask whether the presence of preference heterogeneity arising for example from different ethnic groups or geographic locations affects the ability of the poor to extract resources from the rich we study the equilibrium of a game in which coalitions of individuals form parties parties propose platforms and all individuals vote with the winning policy chosen by plurality political parties are restricted to offering platforms that are credible in that they belong to the pareto set of their members the platforms specify the values of two policy tools a general redistributive tax which is lump sum rebated or used to fund a general public good and a series of taxes whose revenue is used to fund specific targeted goods tailored to particular preferences or localities our analysis demonstrates that taste conflict first dilutes but later reinforces class interests when the degree of taste diversity is low the equilibrium policy is characterized by some amount of general income redistribution and some targeted transfers as taste diversity increases in society the set of equilibrium policies becomes more and more tilted towards special interest groups and against general redistribution as diversity increases further however the only policy that can emerge supports exclusively general redistribution

the dynamics of company profits an international comparison 1 profits and the process of competition dennis c mueller 2 modelling persistent profitability paul a geroski 3 the persistence of profits in the united states dennis c mueller 4 the persistence of profits in us manufacturing industries ioannis kessides 5 the persistence of profitability in canada r shyam khemani and d m shapiro 6 persistence of corporate profits in the federal republic of germany joachim schwalbach and talat mahmood 7 the persistence of profits in france frederic jenny and andre paul weber 8 the persistence of profits in japan hiroyuki odagiri and hideki yamawaki 9 the persistence of profits in the uk john cubbin and paul a geroski 10 the persistence of profits international comparison hiroyuki odagiri and hideki yamawaki 11 the persistence of profits in perspective paul a geroski and dennis c mueller

invariances and diversities in the evolution of manufacturing industries this work explores and compares some basic properties of corporate growth process at both aggregate manufacturing level and disaggregated sectoral levels using an extensive dataset on italian manufacturing firms we investigate which properties of firm growth dynamics are robust under disaggregation we compare the results obtained with three different definitions of firm size namely total sales number of employees and value added our analysis suggests that while different sectors are characterized by significant differences in firm size distributions in the degrees of concentration and in the autoregressive structure of the growth processes there are also regularities which hold across all of them such as the approximate unit root nature of the growth process and the power exponential shape of the growth rates density together these stylized facts suggest challenging puzzles on the drivers of corporate growth and the resulting industrial structures