Fiscal Commitment Research Articles

Capital and labor taxes with costly state contingency

We analyze optimal capital and labor taxes in a model where (i) the government makes noncontingent announcements about future policies and (ii) state-contingent deviations from these announcements are costly. With Full Commitment, optimal announcements coincide with expected future taxes. Costly state contingency dampens the response of both current and future capital taxes to government spending shocks and labor taxes play a major role in accommodating fiscal shocks. These features allow our quantitative model to account for the volatility of taxes in US data. In the absence of Full Commitment, optimal announcements are instead strategically biased, because governments have an incentive to partially constrain their successors. The cost of deviating from past announcements generates an endogenous degree of fiscal commitment, determining the average level of capital taxes.

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Influence of public credit risk on private capital in public–private partnership models

AbstractPublic credit risk is an important factor in private capital's decision to participate in public–private partnership (PPP) projects. We explore why private capital participates in such projects using dynamic game theory. We assess the framework of credit rating agencies assessment of local fiscal risk and construct a measure of fiscal commitment risk and public credit risk evaluation indicators. Using China's provincial panel data from 2013 to 2019, we found that government credit risk reduces private partner participation. Private capital participates in PPP projects for profit if the local government has established good credit awareness and contractual spirit.

The game: Description and analysis of how street vendors keep working on the streets of Bogotá despite state intervention

Day-to-day management of street vending is much more a matter of starting negotiations, mediating between the interests of distinct groups, and making agreements, than it is about enforcing confusing and at times contradictory legal mechanisms with limited effectiveness. Based on the results of extended fieldwork in a low-income outer locality of Bogotá (Ciudad Bolívar), I will argue that street vendors and state representatives interact around a four-step dynamic known as the ‘ game’, which provides them with ‘working stability’ or high degrees of legitimacy, despite frequent arbitrary – and not just discretionary – interventions from the police and other state representatives. In short, the game works as follows: complaints against vendors build-up and interventions take place. Street vendors use different resistance strategies, but tension intensifies, then crisis is reached. As both parties have strong incentives to negotiate, they reach basic coexistence agreements. Vendors fail to comply with the agreements because regulations made to sanitize poverty and to hide the face of misery are rarely applicable. The cycle restarts. I conclude by arguing that efforts to eliminate or limit street vending will not be successful or sustainable until the state makes the political and fiscal commitment to offer substantial employment programs and/or guarantee a minimum income to vulnerable families.

Fiscal commitment and sovereign default risk

This paper studies the interaction between fiscal commitment and sovereign default risk in a model with optimal taxation and government spending. A time-inconsistency problem arises in our framework as the government cannot credibly commit to its future tax policies. As a result, it chooses suboptimally low fiscal adjustments and defaults too frequently. Introducing a commitment device to future tax policies can mitigate this time-inconsistency problem and improve the government's borrowing opportunities. However, such a commitment device also entails a loss of tax contingency that might be costly. Our quantitative analysis shows that committing to an inflexible tax plan is counterproductive: the lack of contingency hurts the government's debt sustainability and reduces welfare. In contrast, committing to a flexible tax plan that is contingent on future economic conditions can improve debt sustainability by 53.3% and result in a significant welfare gain.

Balancing Scientific Advice with Political Realities during the Campaign to Pass California's Ballot Proposition 14.

Balancing Scientific Advice with Political Realities during the Campaign to Pass California's Ballot Proposition 14.

Warfare, Fiscal Gridlock, and State Formation during Europe’s Military Revolution

We analyze a general commitment problem inherent to the formation of tax states: How can a state credibly promise to use tax revenues for pre-specified purposes? At the start of the early modern period in Europe, monarchs controlled expenditure. Where parliaments controlled taxation, the result was endemic fiscal gridlock—which became increasingly intolerable during Europe’s military revolution. Exploiting a new panel database, we show that warfare was associated with significant fiscal reforms—either increasing the crown’s powers of taxation or parliament’s powers over expenditure. Although pure parliamentary control was rare, we show that even absolutist monarchies decreased the amount of expenditure that the crown controlled. Reducing the crown’s ability to unilaterally determine how to spend state revenues directly mitigated the fiscal commitment problem, by making the state’s expenditure promises more credible, and was associated with significantly greater revenue extraction.

Are Policy Strategies for Addressing the Opioid Epidemic Partisan? A View from the States.

In contrast to the Affordable Care Act, some have suggested the opioid epidemic represents an area of bipartisanship. This raises an important question: to what extent are Democrat-led and Republican-led states different or similar in their policy responses to the opioid epidemic? Three main methodological approaches were used to assess state-level policy responses to the opioid epidemic: a legislative analysis across all 50 states, an online survey of 50 state Medicaid agencies, and in-depth case studies with policy stakeholders in five states. Conservative states pursue hidden and targeted Medicaid expansions, and a number of legislative initiatives, to address the opioid crisis. However, the total fiscal commitment among these Republican-led states pales in comparison to states that adopt the ACA Medicaid expansion. Because the state legislative initiatives do not provide treatment, these states spend substantially less than states with Democratic control. Rather than persistently working to retrench all programs, conservatives have relied on policy designs that emphasize devolution, fragmentation, and inequality to both expand and retrench benefits. This strategy, which allocates benefits differentially to different social groups and obfuscates responsibility, allows conservatives to avoid political blame typically associated with retrenchment.

The Impact of Supplemental Instruction on the Performance and Attitudes of General Chemistry Students

The Impact of Supplemental Instruction on the Performance and Attitudes of General Chemistry Students

Monetary-fiscal policies interactions and optimal rules in Egypt

Purpose This paper aims to estimate a New Keynesian small open economy dynamic stochastic general equilibrium (DSGE) model for Egypt using Bayesian techniques and data for the period FY2004/2005:Q1-FY2015/2016:Q4 to assess monetary and fiscal policy interactions and their impact on economic stabilization. Outcomes of monetary and fiscal authority commitment to policy instruments, interest rate, government spending and taxes, are evaluated using Taylor-type and optimal simple rules. Design/methodology/approach The study extends the stylized micro-founded small open economy New Keynesian DSGE model, proposed by Lubik and Schorfheide (2007), by explicitly introducing fiscal policy behavior into the model (Fragetta and Kirsanova, 2010 and Çebi, 2011). The model is calibrated using quarterly data for Egypt on key macroeconomic variables during FY2004/2005:Q1-FY2015/2016:Q4; and Bayesian methods are used in estimation. Findings The results show that monetary and fiscal policy instruments in Egypt contribute to economic stability through their effects on inflation, output and debt stock. The monetary policy Taylor rule estimates reveal that the Central Bank of Egypt (CBE) attaches significant importance to anti-inflationary policy and (to a lesser extent) to output targeting but responds weakly to nominal exchange rate variations. CBE decisions are significantly influenced by interest rate smoothing. Egyptian fiscal policy has an important role in output and government debt stabilization. Additionally, the fiscal authority chooses pro-cyclical government spending and counter-cyclical tax policies for output stabilization. Again, past values of the fiscal instruments are influential in the evolution of the future fiscal policy-making process. Originality/value A few studies have examined the interaction between monetary and fiscal policy in Egypt within a unified framework. The presented paper integrates the monetary and fiscal policy analysis within a unified dynamic general equilibrium open economy rational expectations framework. Without such a framework, it would not be easy to jointly analyze monetary and fiscal transmission mechanisms for output, inflation and debt. Also, it would be neither possible to contrast the outcome of monetary and fiscal authorities commitment to a simple Taylor instrument rule vis-à-vis optimal policy outcomes nor to assess the behavior of monetary and fiscal agents in macroeconomic stability in context of an active/passive policy decisions framework.

Choosing a Collegiate-training Aircraft with Confidence

Qualitative preference is frequently used to make significant, programmatic choices between competing suppliers and products. Translating qualitative choice into defensible quantitative representation is possible with patience, method and, care. One example of this translation is the application of a popular Total Quality Management (TQM) tool, known as Quality Function Deployment (QFD), in the choice of a new/replacement, collegiate-training aircraft. Using QFD is especially important when a fleet replacement is being considered as the cost of a new, current aircraft can easily approach $500,000; thus a significant fiscal commitment is incurred in replacing a multi-aircraft fleet. A choice of this magnitude deserves multiple stakeholder inputs and requires respect from differing viewpoints. The successful outcome of any decision process ultimately hinges upon confidently exercising the best choice. The decision tool needs to be transparent, easy-to-understand and easy-to-apply. The corresponding choice of a preference scale can either mask or illuminate driving criteria in the decision process. This paper explores the application of QFD to the decision process across competing training aircraft choices and offers justification of the QFD non-linear “0, 1, 3, 9” preference scale. Application research into the mechanics of human preference showed that if 95% reliability in choice between alternatives is desired, then the perceived difference between the choices needs to be a factor of 3.0, as is the case in the employed QFD scale. Selection criteria used in the training aircraft decision, their dissimilar weighting, and the evaluation of competing aircraft in a recent collegiate-training aircraft selection are displayed as exemplars.

THE INFLUENCE OF FISCAL DECENTRALIZATION, ORGANIZATIONAL COMMITMENT AND LEADERSHIP STYLE ON THE PERFORMANCE OF REGIONAL APPARATUS ORGANIZATIONS (OPD)

This study aims to examine the effect of fiscal decentralization, organizational commitment and leadership style on OPD performance. This study uses a quantitative approach with explanatory research which is useful to analyze how a variable affects other variables for hypothesis testing. Respondents in this study were Head of OPD (Echelon II and Echelon III) in Batu City Government, Malang City, and Malang Regency. Sampling technique used by using Saturated Sampling Method, using survey method to 120 Head of OPD. This research uses Structural Equation Modeling - Partial Least Square (SEM-PLS) analysis tool, with the help of WarpPLS 3.0 software. The result of hypothesis testing shows that fiscal decentralization has a positive effect on OPD performance. This means that with increased understanding of fiscal decentralization will be able to improve OPD performance. In terms of the type of leadership style itself shows good results and has a positive and significant effect on OPD performance. While the organizational commitment variable can not affect the performance of OPD.

Fiscal Commitment and Sovereign Default Risk

This paper studies the interaction between fiscal commitment and sovereign default risk in a model with optimal taxation and government spending. A time-inconsistency problem arises in our framework as the government cannot credibly commit to its future tax policies. As a result, it chooses suboptimally low fiscal adjustments and defaults too frequently. Introducing a commitment device to future tax policies can mitigate this time-inconsistency problem and improve the government's borrowing opportunities. However, such a commitment device also entails a loss of tax contingency that might be costly. Our quantitative analysis shows that committing to an inflexible tax plan is counterproductive: the lack of contingency hurts the government's debt sustainability and reduces welfare. In contrast, committing to a flexible tax plan that is contingent on future economic conditions can improve debt sustainability by 53.3% and result in a significant welfare gain.

“Women Friendly” Spending? Welfare Spending and Women's Participation in the Economy and Politics

What effect do social welfare policies have on women's active involvement in the economy and politics? Though there is much policy and scholarly debate on a wide spectrum of socioeconomic and political outcomes of welfare spending, little research has explored the possible impact that social welfare policies have on one of the supposed major beneficiaries of such policies—women. Combining data on welfare spending in three areas—social security, health, and education—with data on women's labor force participation and share of seats in national legislatures, this article examines the extent to which welfare spending might affect women's economic and political status. The results from a panel of 97 countries for the years spanning 1990 to 2010 indicate that the government's fiscal commitment to social policies is positively related to female participation in the total labor force and national politics. The findings are robust to different model specifications, sample selection, and the use of instrumental variables. One major policy implication of the findings is that the government's fiscal commitment to key social welfare areas are likely to contribute to women's economic and political empowerment, which might in turn help address gender imbalances in the economy and political sphere.

European Double Taxation and Human Rights in a Globalised World

“A right is not what someone gives you; it's what no one can take from you.” Ramsey Clark The ECHR is an international convention designed to protect taxpayers, in much the same way as a double taxation convention. A good example of the overlap is the non-discrimination provisions found in both double taxation conventions and human rights treaties. The models, on the basis of which the vast majority of double taxation conventions have been negotiated, predate the main progress in human rights law. It is a suitable point to open a discussion of the extent to which double taxation conventions might give rise to issues of compatibility with human rights norms, or whether changes might be made to the model conventions to ensure better conformity with those norms. The aim of this study is to elaborate the conceptual links between double taxation agreements and human rights and to demonstrate this with the example of the Council of Europe State Parties and their fiscal policy commitment to human rights obligations with a focus on European double taxation treaties. Thus, this contribution discusses and suggests means improve systematic protection of human rights from double taxation with a focus on the European context. The research considers certain issues relating to the compatibility of double taxation conventions with human rights conventions.

Fiscal sustainability in EMU countries: A continued fiscal commitment?

The aim of this paper is to study the sustainability of public finances in the Eurozone particularly after the 2007 financial crisis. This paper goes beyond the standard analysis of the univariate properties of the fiscal variables through the estimation of a time-varying fiscal reaction function on a 11-country panel for a period spanning from 1970 to 2014. Even if panel unit root or stationary tests may provide a rough first insight on the sustainability of the public finances, they fail to highlight the adjustment mechanisms to debt overhang in recent years. The main advantage of our empirical approach is that it clearly captures the government’s dynamic response to debt accumulation, which signals its commitment to readjust public debt towards a sustainable path. Time-varying estimates of the fiscal reaction function shed new light on this respect and reveal certain heterogeneity among EMU countries on the way they manage their public finances. This paper helps ascertain whether the public resources destined to bail out troubled countries triggered effective fiscal responses.

The Politics of Scaling Up Social Protection in Kenya

This paper discusses the role of Kenya’s political settlement in the adoption and promotion of social protection, which has expanded significantly since 2003. Analysis focuses on the interplay between the domestic political settlement and external factors in shaping the social protection discourse and policy and provisioning outcomes. Successive regimes in Kenya since 2003 supported social protection as part of their framing of the development discourse. There has been significant progress in developing the legislative and policy structures to support cash transfer provision, including a commitment in the 2010 constitution, together with an increasing fiscal commitment, largely donor supported, and a rapid expansion of cash transfer coverage. However, where the realisation of constitutional or legislative commitments would have a cost to the political settlement, disturbing clientelist relationships, less progress has taken place, as illustrated by the failure of the proposed National Social Health Insurance Fund. Implementation of social protection policy and provision has been managed in such a way that the clientelism at the centre of the political settlement is not disturbed. The extent to which the political settlement ultimately shapes social protection outcomes is also a function of the preferences and incentives of the donor community and it is the convergence of the requirements of the political settlement with donor interests that has driven the successful provision of social assistance, whereas the lack of convergence has hindered the development of social health insurance. Initially a donor-led agenda, cash transfer provision has become increasingly popular politically, as politicians have realised its potential as an additional constituency-level patronage resource, which they have successfully co-opted in recent years, resulting in the paradox that improved, and largely externally financed, social protection performance is intrinsically linked to the entrenchment of the existing political settlement. The paper concludes that the social protection agenda in Kenya is defined by the extent of accommodation between the underlying clientelist interests of political actors and the aspirations of external actors.

Factors Influencing the Private Involvement in Urban Rail Public-Private Partnership Projects in China

Private investors have been encouraged to participate in the development and operation of urban rail projects in China through Public-Private Partnerships (PPPs), given the fact that subnational governments are suffering from urgent development demands and severe fiscal pressure. However, there is no formal assessment to determine the private involvement in a PPP project. This problem is particularly critical in the sector of urban rail, in which the huge investment cannot rely on the private sector alone. This study hence aimed to uncover and identify the influencing factors. Multiple research methods, including content analysis, case study and focus group discussion were adopted to achieve the research purpose. Seven types of influencing factors were identified, including project financial model, government fiscal commitment, risk allocation, public accountability, efficiency considerations, policy and regulations, and organisational marketing strategies. The findings add to the current knowledge base by uncovering the drivers behind private involvement in a PPP project. They are also beneficial for industry practitioners as a basis/checklist to determine the private involvement.

Kajian Potensi Dan Peluang Pembangunan Infrastruktur Di Sektor Sosial Dengan Skema KBPU

This study aims to formulate recommendations and opportunities for potential infrastructure development in the social sector by using KPBU scheme. The direct beneficiaries of this activity are the Deputy of Investment Planning as a unit that is directly responsible for formulating the proposed establishment of the Act related KPBU in the field of infrastructure investment. The output of this activity is also expected to be useful for investors in infrastructure and related stakeholders. Model cooperation Public Private Partnership in social infrastructure should take into account the uniqueness of each sector, particularly the constraints, risks and macro conditions, including fiscal policy and commitment to the objective of each sector. So that needs to be made cooperation mechanism Public Private Partnership in the field of social infrastructure by making adjustments to the conditions and limitations in the field of social infrastructure. Results and recommendations are discussed further in the paper.
 
 Keywords: Multi Criteria Analysis, infrastructure development

From Compassionate Conservatism to Obamacare: Funding for the Ryan White Program During the Obama Administration.

To examine President Obama's fiscal commitment to the Ryan White Program (formerly Ryan White Comprehensive AIDS Resource Emergency Act), which provides funding for economically disadvantaged people and families affected by HIV. We analyzed budgetary request and congressional appropriation data from 2009 to 2016. The data are available from the Health Resources and Services Administration and the Henry J. Kaiser Family Foundation. Increased coverage for people living with HIV/AIDS provided by the Affordable Care Act most likely led the Obama administration to request small increases and at times decreases in funding for the Ryan White Program. Congress passed either small increases or decreases in appropriations for the Ryan White Program. Decreases or small increases in the Ryan White Program funding risk progress made in treating HIV among economically disadvantaged patients.