bluuebunny/crossref_metadata_2025 huggingface dataset:
A Framework for Evaluating State-Assisted Financing Programs (1)
Authors: Gittell Ross , Kaen Fred R.
Published: May 2024

State-assisted financing programs provide both economic and social benefits but can also affect state budgets and credit ratings. State-assisted financing programs are often touted as programs for mitigating or solving financial market imperfections, especially credit market failures. in reality, these programs are designed to: (1) address borrower credit risk problems; (2) provide a lender of last resort to small businesses during and immediately after economic recessions; (3) provide a less costly and more socially desirable alternative to direct social payments for people living in economically depressed regions or regions experiencing the strain of structural adjustment; and (4) direct funds into preferential uses. This paper provides an historical evolution of State-assisted financing programs in the United States and a framework for evaluating the financial costs associated with extending financial assistance to prospective recipients. Four categories of financing programs are reviewed: (1) concessionary finance for projects that already have positive private NPVs; (2) mitigating market imperfections financing for potentially positive private NPVs; (3) valuing social externalities subsidies for projects with negative private NPVs, but positive externalities producing a positive public NPV; and (4) politically compelling projects with negative private and public NPVs. A framework is developed that values loan guarantees as put options. Who pays the option premium and who receives the benefits depend on the fee charged for the guarantee and the interest rate the lender charges to the borrower whose loan has been guaranteed. Finally, the risks, moral hazards and policy issues of State-assisted financing programs are discussed and suggestions for overcoming special interest an d collective action obstacles are offered.
Taxation by State and Organized Crime: Harmony or Conflict?
Authors: Alexeev Michael , Janeba Eckhard , Osborne Stefan
Published: May 2024

Organized crime has played an important role in several economies in transition, where the state has been either unwilling or unable to fulfill some of its important functions. in particular, the mafia has taxed the producers and provided such services as protection and contract enforcement. Typically, the analytical literature has assumed that the mafia operates only in the unofficial economy. We drop this assumption and examine the previously unexplored implications of the mafia's taxation of legal economic activity and particularly the effect this has on the revenue-maximizing government's tax policy and its incentive to combat the mafia. Our main result is that as long as the demand for the firms’ output is inelastic and if the mafia is not too strong, as measured by how costly it is for the mafia to tax official sales, its taxation of legitimate economic activities does not affect the revenue-raising capacity of the state. However, if the demand is elastic, an increase in the mafia's strength always hurts the state. in addition, we investigate the official tax policy consequences of the change in the firms’ costs of operating underground, the government auditing of firms, and the implications of welfare optimization by the state.
Measuring Tax Effort in Central and Eastern Europe
Authors: Mertens Jo Beth
Published: May 2024

This paper uses the method of measuring tax capacity and tax effort to analyze how well Central and Eastern European (CEE) countries are utilizing their tax capacities, relative to one another. Using panel data for ten CEE countries covering the years 1992–2000, I construct a tax effort index for each country and conclude that there are substantial variations in tax effort among CEE countries and several countries have the potential to increase revenues via increased tax effort.
Developing E-Procurement Systems: A Case Study on the Government E-Procurement Systems in Korea
Authors: Seong Si Kyung , Lee Jae Yong
Published: May 2024

Korea launched national e-procurement systems in September 30, 2002. the adoption of the e-procurement systems in the central government of Korea has been acknowledged as successful. This paper presents a case study describing the public e-procurement systems of Korea, analyzing the development process, and finding factors for successful adoption of the systems. Government e-Procurement Systems (GePS) is a portal site providing information on public procurement and an application service provider of public procurement. GePS advances procurement service by reducing paper work and red tape, expanding the range of commodity selection, and standardizing services. Government-wide support including the President had a crucial role for the adoption of GePS. High capacity of information technology and institutional collaboration among public agencies were other foundations for the successful establishment of GePS.
Performance Management as Administrative Reform: Is it Improving Government Performance?
Authors: Heinrich Carolyn J.
Published: May 2024

This article introduces the symposium topic—performance management—and provides an overview of the articles that follow. A summary of the lessons learned and recommendations for more effective performance management based on these studies’ findings are also presented.
Principles for the Performance Management of Public Employment Services
Authors: Grubb David
Published: May 2024

In the field of public employment services (PES), performance can be measured primarily in terms of employment outcomes - such as the employment rate, unemployment rate and earnings - achieved by the clients of each local employment office or employment service provider. An increasing number of OECD countries now have performance management systems in place within the national PES or under nationwide or localized subcontracting arrangements. the principal in these systems needs to renew or discontinue contracts with service providers according to the estimated net impact of their services, i.e. gross outcomes relative to a “benchmark” or “target” level, which will vary according to local-labor-market and client-group characteristics. These benchmarks can be explicitly estimated using econometric methods, but they can also be generated automatically under an institutional set-up that ensures that multiple service providers are handling comparable client groups on equal terms. An alternative contracting model involves paying providers the actual value of the summary gross outcome measure but with lump-sum co-payments, which are set to ensure that no large economic rents arise. as various principles are better understood and operational systems are developed, explicit performance management arrangements may increasingly outperform traditional hierarchical management and ad hoc management-by-objectives approaches.
Editor's Introduction
Authors: Vigneault Marianne
Published: May 2024

Many federations are undergoing serious debate about the design of federal fiscal relations and institutions. This symposium provides a comparative perspective on important issues in the field of fiscal federalism that are in the forefront of discussions by economists and policy makers. in the symposium papers that follow, experts in the field of fiscal federalism from Australia, Canada, Germany, Switzerland, and the United States provide their perspective on issues ranging from equalization schemes to secession rights.
Parents who Won't Pay: Expected Parental Contributions and Postsecondary Schooling
Authors: Kalenkoski Charlene Marie
Published: May 2024

Evidence from the High School and Beyond (HS&B) Surveys indicates that many parents of first-year college students do not make their Expected Parental Contribution (EPC) toward their child's postsecondary education. This is a concern because children with under-contributing parents may experience lower schooling outcomes than those with parents who make their expected contributions. This paper investigates the effects of changing the EPC on several schooling outcomes as well as the effects on scholarships and grants and parental transfers. the results indicate that changing the EPC does not affect the decision to enroll in postsecondary school or the amount of schooling expenditures, although it does affect whether or not a non-vocational student enrolls in a four-year program. the results also indicate that increasing the EPC negatively affects the amount of scholarships and grants received by a student while positively affecting parental transfers, suggesting a tradeoff between external and parental funds in the financing of a child's postsecondary education.
Bridging the Coverage Gap: Issues and Questions for Social Security Administrations
Authors: McKinnon Roddy
Published: May 2024

The majority of the world's population either is without or has inadequate access to social security. of those without adequate social security protection, older people in developing countries represent a significant and growing element. Nonetheless, evidence suggests that extending basic social security coverage to older people is fiscally and administratively feasible for all but the poorest of countries through universal non-contributory tax financed pensions. With this objective in mind, the paper draws attention to a number of practical issues and questions confronting developing country social security administrations.
Why Some People Go Private and Others Do Not: Supplementary Health Insurance in Spain
Authors: Costa Joan , Rovira Joan
Published: May 2024

Although the National Health System (NHS) is the main healthcare financing body in Spain, an increasing share of the population ‘goes private’ by obtaining supplementary private healthcare insurance (PHI). Qualitative research is very limited and empirical studies hardly ever provide us with what lies behind the figures. This paper seeks to examine qualitative and quantitative evidence on the individual's motives for the purchase of PHI. We undertook two focus groups together with a representative survey containing open–ended and closed questions among a sample of the Catalan population. Our findings indicate a high degree of heterogeneity in the motives for going private, ranging from the already acknowledged ‘quality motive’ to simple tradition. A certain share of the population reveals ‘captivity’ and satisfaction towards the NHS, as well as being unable to afford private alternatives. Furthermore, risk aversion and income was significantly higher for those purchasing PHI.
Challenges in the Regulation of Brazilian Private Health Insurance
Authors: Ocké-Reis Carlos Octávio
Published: May 2024

This paper shows that regulatory actions can work as an instrument to correct the shortcomings of the private health insurance market. However, despite rules that defend both competition and consumer rights, these actions can, paradoxically, bring about a more marked concentration of the market if the power of the oligopolies is not challenged. to critique this sort of management, we first discuss the political context in which the Agência Nacional de Saúde Suplementar – ANS (National Supplementary Health Agency) arose, and describe the nature of the economic crisis facing the market. Considering these issues, we suggest an alternative proposal, in which the Agency would play a key role in overcoming the crisis, particularly by supporting public health principles and reducing the price of health insurance. We finally argue for the institutional reform of the market, restoring the meaning of the Agency's rules and preventing the ANS from falling under the power of the oligopolies.
Debt and Budget Surpluses with A Tax Habit and Balanced Budget Hawks
Authors: Loukoianova Elena , Vahey Shaun P.
Published: May 2024

In this paper, we demonstrate the theoretical implications of a tax habit and balanced budget hawks on the (log) primary budget surplus. the tax habit causes the budget surplus to respond more smoothly to the expected present value of government purchases than in a tax smoothing model. Put differently, a fiscal authority with a tax habit smoothes the adjustment of taxes to “news”. Fiscal policymakers advocating contemporaneously balanced budgets, which we refer to as “balanced budget hawks”, increase the sensitivity of surpluses to current government purchases. Using UK data from 1942 to 1964, we utilize Bayesian Monte Carlo Markov Chain simulation methods to gauge the importance of habit and hawks effects.
Government Debt Management in Europe: Recent Changes in Debt Managers’ Strategies
Authors: Wolswijk Guido , de Haan Jakob
Published: May 2024

This paper presents a survey of changes in the strategies of government debt managers in European countries. These changes were introduced in response to alterations in the working environment of debt managers, like the introduction of the euro, declining government debt ratios, the introduction of electronic trading systems, and the changed institutional position of debt managers. An important recent feature of debt management strategies in the euro area is the convergence of practices. There is a clear tendency to issue ‘plain vanilla’ bonds, while there is less emphasis on issuing foreign currency debt. Debt managers increasingly use interest rate swaps and introduce innovative instruments, such as inflation-indexed bonds.
Guest Editor's Introduction: Sports and Public Finance
Authors: Humphreys Brad R.
Published: May 2024

The last 30 years have seen extraordinary changes in sports facility construction and financing. the five papers in this special issue examine the current state of sports facility financing and economics from the cutting edge of research. the papers in this special issue examine the financing and economics of sports facilities from a variety of perspective, including tangible and intangible economic benefits, new financing models, and an assessment of the profitability of new stadiums.
Valuing Defense
Authors: Smith Ron
Published: May 2024

This paper examines three questions in the valuation of defense in the UK. First, how to calculate the value of defense to society in order to determine the appropriate budge? Second, how to ensure value of money in defense procurement? Third, how to value defense assets as required under the new Resource Accounting and Budgeting system for controlling public finance? A central theme of this paper is that while budgets and forces can be measured and military capabilities can be estimated, the final security outputs are inherently intangible. It is this intangibility that makes the valuation of defense so difficult in all three areas.
Subsidies to Higher Education and Income-Tax Progression
Authors: Barbaro Salvatore
Published: May 2024

The impact of fiscal activity on human-capital formation has often been analyzed with regard to the expenditure side of the budget; i.e., the subsidization of (higher) education. However, recent contributions have increasingly focused on the effect of taxation on human-capital formation. Less attention has been given to the simultaneous effect of both subsidization and taxation. as subsidies to higher education may offset the distortionary effect of taxation, this paper aims to analyze the amount of subsidization that is necessary to counteract the discouraging effect of various kinds of income-tax progression on human-capital accumulation. An important policy advice derived from the analysis is that a country's educational policies should be evaluated, not just by the levels of educational spending, but also by the level and structure of taxation.

The framework we use to illustrate our point is a two-period cohort model with heterogeneous agents, who endogenously decide on higher education with respect to taxation and subsidization. in this framework, we also demonstrate that subsidies may fail to offset existing tax distortions, limiting the optimistic view of some previous literature. in particular, we show that a second-best subsidy rate must be lower than unity. Otherwise an optimal subsidy rate leads to the problem of overeducation.
Government Transfers and Inequality: An Anatomy of Political Failure
Authors: Clark J. R. , Lee Dwight R.
Published: May 2024

Governments have long justified transfer payments in the name of reducing income inequality. the justification seems plausible and compassionate, if one takes an idealistic view of public and private incentives. Political authorities can simply take money from the wealthy with a progressive tax structure and use much of it to make net transfers to the poor, who would otherwise lead impoverished lives. Initially, this may actually seem to reduce income inequality and increase the incomes of the poor. However, political transfers soon begin motivating public and private responses that offset any equalizing effect the transfers may have upon income, and increase economic inefficiency. the long-run effects of the transfers are invariably no reduction in income inequality, fewer of the poor moving up the income ladder, and a national income smaller than it would otherwise be. This leaves the poor worse off than if the transfers had never been initiated, since they end up with about the same share of a smaller total income. Unfortunately, the poor have become both dependent upon, and victims of, the transfers, which makes it politically difficult for short-sighted politicians to improve the plight of the poor in the long run by eliminating the transfers.
The Idea of Welfare and the Welfare State
Authors: Hamlin Alan
Published: May 2024

While the general idea of the welfare state may seem clear enough in practice, the content of the basic concept of welfare, the relationship between individual welfare and social welfare, and the relationship between any concept of welfare and the state are all disputed. the aim here is to provide a guide to at least some aspects of these disputes and therefore to reveal some of the complexities that lie within the idea of the welfare state.
Inhibiting Institutional Inertia: Squaring Iron Triangles While Reforming Welfare
Authors: Reksulak Michael
Published: May 2024

The enduring slogan preceding the passage of the 1996 Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) was “to end welfare as we know it.” Common political wisdom is that, measured in caseload numbers and by welfare-to-work efforts, the reform was an unmitigated success. This paper takes a look into what Blank (2002) calls the “black box” of policy adjustments at the level of the welfare managers and the frontline bureaucracy. An analysis of their incentive structure reveals explanations of how the institutional resistance to change was defused. It also implies a specific policy toolbox for situations in which the reduction of the bureaucracy itself is part of the objective of welfare reform. A combination of block-grants, devolution to the smallest feasible structural level and vigorous competition by private sector providers would ensure a higher likelihood of success under this scenario.

Power has only one duty—to secure the social welfare of the People. (Benjamin Disraeli (1804–1881), British statesman)1

Welfare is hated by those who administer it, mistrusted by those who pay for it and held in contempt by those who receive it. (Peter C. Goldmark Jr, NY State Budget Director, as quoted in the New York Times, 24 May 1977)2
Polycentricity, Political Economy, and the Welfare State
Authors: Wagner Richard E.
Published: May 2024

This paper uses the welfare state as a vehicle for contrasting alternative theoretical orientations toward political economy: one orientation conceptualizes the state as an organization; the other, which is embraced here, conceptualizes the state as an order that in turn contains numerous organizations. the programs associated with the welfare state are thus emergent outcomes of polycentric processes and not the product of some actor's maximizing choice. Among other things, this alternative conceptualization provides a different orientation toward state-sponsored redistribution.
Global Aging Pressures: Impact of Fiscal Adjustment, Policy Cooperation, and Structural Reforms
Authors: Botman Dennis , Kumar Manmohan S.
Published: May 2024

This paper undertakes a rigorous analysis of the effects of policies to respond to the looming demographic pressures in Europe and elsewhere. We examine the impact of fiscal adjustment by itself and when pursued in combination with tax, labor and product market reforms, using the IMF's Global Fiscal Model (GFM), calibrated to the German economy, the euro area, and the United States. We also explore the international spillover effects of demographic pressures and associated fiscal adjustment, and the benefits of cooperative action. in addition, we examine the extent to which structural reforms (including tax reform) to boost productivity growth, labor participation, and product market competition could ameliorate the adverse short-term effects of adjustment. the results suggest (i) substantial spill-over effects of aging on debt sustainability through international financial channels; (ii) the preferred adjustment package is broad-based relying on both revenue and expenditure measures while avoiding increases in direct taxes; and (ii i) there are substantial benefits from fiscal cooperation. Nonetheless, even a cooperative response has initial contractionary effects, and we show that these effects can be offset by combining fiscal adjustment with expeditious implementation of structural reforms in product and labor markets, as envisaged in the Lisbon Agenda. Moreover, the benefits accrue early and to all income-groups if the reforms are implemented as part of a package.
The Dual Corporate Income Tax in China: The Impact of Unification
Authors: Kong Shuhong , Li Zhenzi , van der Hoek M. Peter
Published: May 2024

For many years, foreign funded companies in China enjoyed a relatively low tax rate and a series of preferential policies which were aimed at encouraging foreign direct investment in China. By adopting a new law in 2007, however, the National People's Congress proclaimed the end of the dual corporate-income-tax system. From 2008, the preferential tax treatment of foreign capital will be phased out. as a result, the income tax rate for domestic and foreign funded companies will be unified at the rate of 25%. This paper explores the impact of the dual corporate income tax system on both domestic and foreign funded enterprises and discusses the possible effects of the unification.
Income Inequality & Redistributional Spending: An Empirical Investigation of Competing Theories
Authors: Mohl Philipp , Pamp Oliver
Published: May 2024

The link between income inequality and governmental redistribution is still subject to intense research and debate. Starting with the median-voter-hypothesis, a plethora of theoretical models have been developed during the last three decades to identify and explain possible causal relationships. the empirical evidence so far, however, has been mixed. the aim of this paper is to review the existing literature on inequality and redistribution, to explicate the theoretical causal mechanisms identified so far, and to provide a comprehensive and rigorous empirical test that overcomes some of the shortcomings of previous empirical studies. Using panel data on 23 OECD countries over the time period of 1971–2005, we not only look at different spending categories but also at the share gains of different income deciles and the median-to-mean ratio. We find robust evidence that income inequality affects redistribution. However, the precise degree of this relationship differs for different parts of the income distribution.
Do Benevolent Aspects Have Room in Explaining Eu Budget Receipts?
Authors: Kauppi Heikki , Widgrén Mika
Published: May 2024

This paper evaluates the determination of receipts from the EU budget by considering a richer institutional structure than in earlier studies. The member states have self-interested objectives in CM trying to minimize their contributions within the given framework of the EU budget, whereas EP supports benevolent objectives using its competence to decide on non-compulsory expenditure covering structural spending. CM exerts power in the allocation of both compulsory expenditure, mainly consisting of agricultural spending, and in non-compulsory expenditure. The purpose of this paper is not, however, to evaluate EP's direct influence but rather how the assumed benevolent objectives of EP and income differences turn into member states’ budget receipts in a power politics based model.
Fiscal Decentralization with Regional Redistribution and Risk Sharing
Authors: Vigneault Marianne
Published: May 2024

The paper examines the incentive effects of intergovernmental transfers on regional government spending levels in a multi-period model. The focus is on the repeated strategic interaction between the regional and federal governments and the exploration of the factors influencing the federal government's incentive to create soft budget constraints. The paper models the time-path of regional government spending when regional governments face uncertainty in regard to the federal government's ability to commit to its announced transfer scheme. The results show that in the presence of small shocks to regional endowments, the softness of regional government budget constraints increases over time if the federal government has a known finite mandate. Large shocks, however, can result in discrete changes in regional government spending that persist for the remainder of the federal government's mandate. The paper also shows how the time-path of regional government spending depends on the discount rate, the time horizon, and the regional governments’ prior uncertainty regarding the federal government's commitment ability.
Internalized Contribution Norms and Learning in A Public Goods Experiment in Ghana
Authors: Akpalu Wisdom , Johansson-Stenman Olof
Published: May 2024

This paper links a utility theoretic model based on internalized norms with the results from a novel public good experiment in Ghana. The results indicate that, on average, people are motivated by condition- al cooperation or reciprocity: i.e. they want to contribute more if others have contributed more in the previous round. We also find evidence of learning, in the sense that people's contributions decrease over time even when others’ contributions are held constant. Moreover, our results indicate that the decision to contribute or not does not depend on the size of the contribution of others.
International Cooperation to Combat Climate Change
Authors: Ruis Arjan , de Zeeuw Aart
Published: May 2024

Climate change is a global pollution problem and therefore regulation of this public bad requires international institutions. Since we do not have a government at the level of the world as a whole, we have to rely on voluntary cooperation between states. The literature on international environmental agreements is usually very pessimistic on the possibility to sustain large coalitions and the Kyoto Protocol proves this in practice. In this paper a number of options are developed that improve the situation. If the R&D costs of investments in green capital can be shared among the signatories, the size of the stable coalition can get larger. Furthermore, if asymmetries are considered and the coalition consists of countries or regions with different characteristics, again the result can be improved, especially if transfers between signatories are possible. The paper develops an application to a set of six countries or regions in the world: USA, Japan, OECD Europe, Eastern Europe, Former Soviet Union and China.
Poverty in U.S. Metropolitan Areas: What are the Key Determinants and what is the Role of Local Fiscal Structure?
Authors: Gittell Ross , Tebaldi Edinaldo
Published: May 2024

This paper examines poverty in U.S. metropolitan statistical areas (MSAs). We first investigate the temporal dynamics of poverty rates by using the Markov Transition matrix and then use regression analysis to examine how MSA fiscal tax structure and spending – specifically local property taxes and sales taxes and spending on education – might affect poverty rates and their persistence in U.S. metropolitan areas. We find evidence of poverty persistence across MSAs in the United States. From 1995 to 2005 there was very little change among U.S. metro areas in poverty rank, with the highest poverty areas retaining their undesirable ranking over the business cycle. We identify that poverty can be reduced with sustained periods of economic growth, increased levels of educational attainment, and local and state fiscal policies that encourage human capital accumulation, economic investment and business activities.
Elasticity of Taxable Income: An Introduction and Some Basic Analytics
Authors: Creedy John
Published: May 2024

This paper provides an introduction to the concept of the elasticity of taxable income with respect to the net-of-tax rate. This elasticity aims to capture all potential responses to income taxation in a single elasticity measure, without the need to specify the nature of the various adjustment processes involved or consider the details of tax regulations. These adjustments include, as well as labour supply changes, income shifting between sources which are taxed at different rates, and tax evasion through non-declaration of income. The use of such a ‘reduced form’ approach has proved to be very attractive. The elasticity of taxable income has the added attraction that, under certain assumptions, it is sufficient to obtain a measure of the excess burden of income taxation. Emphasis is placed on the assumptions behind the approach.
Flexible Budgeting in the Public Sector: The Impact of Disasters, Terrorist Attacks and Wars on Government Expenditures
Authors: Choi Sang Ok , Coffey Andrew
Published: May 2024

Government responses to shocks, such as natural disasters, terrorist attacks and wars have consequences for budgets at the US federal and state levels. This article explores the impacts of major shocks on budget expenditures, and the long term implications of government resource allocations. The data include budget expenditures for the federal government and all 50 states from 1972–2008, as well as other economic and social demographic variables. Using a pooled time series cross-sectional design with panel corrected standard errors, we find that significant shocks, such as the 9/11 terrorist attacks, have triggered shifts in government spending priorities, and resulted in the decentralization of fiscal responsibility. Our findings illuminate the interplay between major shocks and budget practices, and begin to describe how flexible budgeting could more evenly distribute fiscal responsibility for public safety in the wake of disasters, terrorist attacks and wars.
Revenue Diversification and the Financing of Large American Central Cities
Authors: Chernick Howard , Langley Adam , Reschovsky Andrew
Published: May 2024

The housing crisis and the Great Recession have placed tremendous fiscal pressure on the nation's central cities. Cuts in state government fiscal assistance to their local governments, plus shrinking property tax bases are challenging the ability of local governments to continue their current levels of public services. Although the property tax remains the single most important own source of municipal government revenues, the decline in property values and the rising tide of foreclosures suggests that the reliance on more diversified local tax bases may strengthen the ability of cities to provide a range of public services for their residents. In this paper, we use a panel of data on the financing of the nation's largest central cities from 1997 to 2008 to explore the role of revenue diversification in determining the level of general revenues of the nation's largest central cities. Because expenditure responsibilities vary among city governments and because overlying governments play different roles, we develop the concept of constructed governments in order to allow us to compare across time and space the revenue-raising policies of large central cities. Our empirical results provide strong support for the hypothesis that a more diversified revenue structure generates more revenues than one which relies primarily on the property tax.
Responses to Local Fiscal Shocks: Path Dependency Effects of the Clean Air Act
Authors: Carr Douglas A.
Published: May 2024

Budgeting decisions in the context of local economic shocks reveal local fiscal priorities. This paper explores the relationship between economic shocks, expenditure path dependencies and local fiscal strategies in the context of federal environmental regulations under the Clean Air Act. Federal regulations applied to counties classified as not in attainment of ambient air quality standards affect local tax bases. Furthermore, these impacts are not immediate in nature, allowing local governments the time necessary to implement their most preferred fiscal response. This econometric analysis of counties throughout the entire U.S. spanning 20 years finds that current expenditure paths are more influential when making cuts than when expanding budgets. Local communities are also seen to employ some short-term use of reserve funds when facing negative expenditure pressures, but these funds are not used to completely prevent expenditure cuts. Furthermore, communities do not use debt as a mitigating response to external tax base pressures, but instead alter expenditure patterns.
The Intersection of Flexible Budgeting and Cutback Management: Factors Affecting the Responses of Selected States to Recent Economic Recessions
Authors: Klase Kenneth A.
Published: May 2024

One important dimension of flexible budgeting involves the ability of a government to deal with adversity. This study examines adversity in the form of economic downturns and their impact on state budgets. It focuses on the role that economic shocks play in the application of flexible budgeting approaches in selected states. Eight contiguous states in the Mid-Atlantic and East Central regions of the U.S. are the focus of this study: Delaware, Maryland, New Jersey, North Carolina, Ohio, Pennsylvania, Virginia, and West Virginia. These states represent a broad sample of diverse states, almost all of which previously had significant budget deficits in the recession of the early 2000s. The research compares the responses of the selected states to the recession in the early 2000's with responses to the recession which started in 2007. Utilizing an historical analysis of responses by the states, the proposed research examines what those responses were and how they differ between the two recessions. It further evaluates to what degree the severity of the recession played a role in the nature of the responses.

This comparative analysis of the responses of the selected states to the two recessionary periods provides a basis for examining what factors affected their responses. Responses by states to adverse economic conditions have been described as involving the application of a range of possible cutback management approaches. This study examines what aspects of the budget environment in the selected states contributes to their ability to undertake particular cutback management measures. It considers what attributes enabled states to have sufficient flexibility to respond to the recessionary impacts. It also examines the degree to which flexibility in response is affected by the severity of the recession.
The Institutional Framework for Shared Consumption: Deemphasizing Taxation in the Theory of Public Finance
Authors: Wagner Richard E.
Published: May 2024

Expositions of the theory of public finance mostly presume that taxation is the primary instrument for generating revenues. This presumption, however, is neither historically accurate nor theoretically necessary. Taxation is a feature of a particular arrangement of ownership which is capable of variation. This paper explores some of that variation in a manner that puts taxation into the background of a theory of public finance while bringing the social organization of shared consumption into the foreground. For instance, cities are corporate bodies which can be organized under diverse institutional arrangements, only a subset of which will give scope to taxation rather than pricing through contract. In this respect, there is a deep similarity between cities and such entities as hotels and malls regarding the types of services they supply, along with a difference in structures of ownership and forms of revenue.
Fiscal Decentralization, Corruption, and the Shadow Economy
Authors: Alexeev Michael , Habodaszova Luba
Published: May 2024

We analyze the implications of fiscal decentralization for the size of the shadow economy, local government corruption, and the provision productivity enhancing local public goods. Most important, we show that an increase in the share of locally raised tax revenue left with the local government brings more entrepreneurs from the shadow and into the official economy. In addition, corruption, measured by the size of bribes that local government imposes on entrepreneurs for letting them use official public goods fully, may increase or decrease, depending on the extent to which public goods enhance the entrepreneur's productivity. We test the model's implication with respect to the size of shadow economy using cross-sectional country-level data and find strong support for our results.
A Social Constructionist Perspective on the Diffusion of Innovative Fiscal Responsibility Legislation
Authors: Wallis Joe , Goldfinch Shaun
Published: May 2024

Compared to competitive, coercive and learning models, social constructionist theory is particularly well-suited to explaining the diffusion of policy norms across cross-country networks. This paper augments this approach with a myth perspective that is applied to an analysis of the diffusion of the qualitative fiscal norms embedded in New Zealand's innovative Fiscal Responsibility Act of 1994. The ‘prime mover’, ‘innovative discontinuity’ and ‘unmodified legislative success’ components of the agent significance myth surrounding this fiscal responsibility law (FRL) are examined and the scope and limits of its subsequent diffusion are related to mutual identification and interaction across pre-established network linkages between actors who have learnt its usefulness. The relative durability of myths compared to fads lend an unpredictability to the diffusion process, the potential limits of which are shaped by cultural and institutional factors that influence the receptiveness of governments to such norm-based approaches to fiscal discipline.
Local Government Amalgamation and Financial Sustainability: The Case of England and Wales
Authors: Andrews Rhys
Published: May 2024

Proponents of local government amalgamation in the UK argue that it improves the financial sustainability of organizations by reducing overall expenditure levels and improving fiscal health. However, critics suggest that structural change is beset with disruptive and unanticipated costs that can take years to overcome. This paper reviews what is already known about these issues in the English and Welsh contexts, before going on to analyze whether the amalgamations of several English counties undertaken in 2009 have led to improved financial sustainability. This analysis suggests that the costs of restructuring have not been recouped by the amalgamated governments, and that those governments perform poorly against indicators of fiscal slack and balance. The implications of these findings are discussed.
The Impact of Amalgamation on the Financial Sustainability of Municipalities in Estonia
Authors: Reiljan Janno , Jaansoo Annika , Ülper Aivo
Published: May 2024

Even though the literature reveals many different aspects of the relationship between municipal size and financial sustainability, the results are inconsistent. Generally, reference is made to the positive effects of increased municipal size on financial sustainability. But is this really the case? The current article sets out to answer this question by analyzing the impact of municipal mergers on the financial sustainability of municipalities in Estonia. The analysis of the effects of mergers is taken further by examining the levels and dynamics of factors of financial sustainability. Attention focuses on the revenue side of budgets, differentiating between amalgamations resulting in different sizes of municipalities and between amalgamations in urban and rural areas. The study found that the financial impact of mergers varies greatly for different groups of municipalities, and financial indicators themselves are sometimes controversial.
Does Bankruptcy Really Matter? The Solvency of Municipal Governments in the Chicago Metropolitan Region
Authors: Hendrick Rebecca , Crosby Andrew
Published: May 2024

As specified by Chapter 9 of the U.S. Bankruptcy Code, local governments that are granted bankruptcy protection must be insolvent, but not all insolvent local governments file for bankruptcy. Almost half of the local governments in the US are not permitted by state law to file for bankruptcy, and many governments with authorization to file may not pursue it because its outcomes are uncertain and often undesirable for both the government and creditors. Thus, one should study insolvent governments more generally rather than only bankrupt governments to obtain an accurate and complete understanding of the fiscal crises that produce bankruptcies. This paper examines different dimensions of solvency for 265 municipal governments in suburban Chicago from 1998 to 2010 to determine the relationship between the dimensions and the likelihood of insolvency among these governments. We find that these indices are related but there is also much variation in the joint distributions of the dimensions, suggesting that Chapter 9 as currently structured has critical flaws in its narrow definition of solvency. We use this variation to deduce the likely causes of poor financial condition in the governments at the extremes of the joint distributions and suggest future avenues of study.

A version of this paper was presented at the annual conference of the Association for Budgeting and Financial Management, Washington, DC, October 3–5, 2013.
Consequences of Assessment Limits
Authors: Connolly Katrina D. , Bell Michael E.
Published: May 2024

Assessment limits are a type of tax expenditure that limits or places a cap on the amount a property can increase in assessed value for taxation each year. Few states estimate the consequences of the assessment limit they adopt in annual tax expenditure reports. The paper reviews the prevalence of assessment limits in the U.S. and motivations for adoption, and discusses the potential consequences. Then, an empirical analysis estimates the impact of New Mexico's assessment limit on the tax base, revenue, equity, and distribution of the tax burden in Los Alamos County and San Juan County using property valuation data. It is important for state policy makers to systematically consider the costs of assessment limits, both in foregone revenues for local governments and the distribution of property tax liabilities, which could ultimately impact the legitimacy of the tax.
Blind, Broke, and Bedlam: Differentiating Fiscal Stress from Bankruptcy in California
Authors: Singla Akheil , Comeaux James , Kirschner Charlotte L.
Published: May 2024

Municipal bankruptcy has historically been an extremely rare event. However, with the onset of the global financial crisis in 2007, many cities in the United States were under fiscal stress, coinciding with an uptick in the number of bankruptcies. This study leverages the proximity and similarity of three Chapter 9 filings in the State of California – the Cities of San Bernardino, Stockton, and Vallejo – to assess the relationship between fiscal stress and bankruptcy. In particular, it explores whether these three cities were explicitly under more fiscal stress than other, comparable cities in California. Using two models for fiscal health, the study finds that while the bankrupt cities were clearly under duress, the existing models of fiscal health did not indicate that the stress experienced by the bankrupt cities was demonstrably more extreme than the conditions faced by numerous other cities. The study concludes that models of fiscal health are unable to account for political or managerial choices that may be driving decisions to file for bankruptcy protection. In addition, the study suggests that the existing models do not account for certain factors that may drive the bankruptcy decision including issues relating to unfunded liabilities to pensions and other post-employment benefits.
Symposium on Fiscal Disparity and Equalization
Authors: Wu Yonghong , Zhao Bo
Published: May 2024

This symposium provides scholars in public finance and management with a forum to showcase some new research on fiscal disparity and equalization. In the last decades, many countries and regions have established fiscal equalization programs to address the interregional or inter-local fiscal disparity, which is caused by differences in revenue-raising capacity and/or the costs of public service provisions. The articles in this symposium examine the extent of fiscal disparity and evaluate the effectiveness of various fiscal equalization programs in China and the U.S. In addition, they provide policy recommendations on how to improve the design of the equalization programs, which are potentially applicable to other countries and regions.
Spatial Decomposition of Funding Inequality in China's Basic Education: A Four-Level Theil Index Analysis
Authors: Wang Wen , Zhao Zhirong
Published: May 2024

Various education finance and taxation reforms in the past several decades have substantially changed China's system for funding basic education, but the present system is still characterized by insufficient funding and large inequalities across localities. Using data of more than 2000 county-level units all over the country during 1998–2005, this study uses Theil index to spatially decompose the pattern of funding inequality in China's basic education across four geographic and administrative levels. The analysis shows that the level of inequality remained high after the rural taxation and education finance reforms since 2000, despite the efforts to increase education-purpose fiscal transfers to local governments, and that the gaps are especially severe across provinces in the same region and across prefectures in the same province.