Public Finance Perspective Research Articles

Tax Regimes, Tariff Revenues and Government Spending

This paper develops a model that describes the role of tariffs as a source of government revenue. The model takes a public finance perspective and treats as part of the optimum revenue-raising tax package, relating the behavior of tariff rates and revenues to observable macroeconomic variables such as income and government spending. Although the approach is quite general, the model is constructed to fit the stylized facts concerning the changing role of the tariff in U.S. history. It is shown that relative collection costs for tariffs and other forms of taxes interact with changes in macroeconomic variables to explain the regime shifts (qualitative changes in the relative importance of tariffs and other taxes) found in U.S. tariff history. Copyright 1992 by The London School of Economics and Political Science.

HOUSING POLICY IN DEVELOPING ECONOMIES: Evaluating the Macroeconomic Impacts*

This paper presents a view of the role of the housing sector in developing countries which emphasizes the potentially high macroeconomic costs of inappropriate housing policies. Traditional public finance perspectives on the role of the housing sector in the economy focus on efficiency and equity implications of the rather modest levels of government spending in the sector. This paper points out that this traditional approach is misleading in that it is less government's spending in the sector than its role in defining regulatory frameworks, pricing policies, and policies affecting the financial sector that comprise the major instruments for influencing the performance of the housing sector and, in turn, the way its performance affects the macroeconomy. The paper also presents a simplified framework for analyzing how housing policies influence the housing sector and the macroeconomy. Simple applications of the framework suggest that the macroeconomic implications of housing policy choices can be of major importance. This is emphasized by two case studies, of policies in Argentina and Poland, where recent housing policies appear to have had major impacts on levels of investment, price and wage levels, and savings rates.

Foreign Aid and Optimal Fiscal Policy

Foreign Aid and Optimal Fiscal Policy

Coprovision: Citizen Time and Money Donations in Public Service Provision

Recent policies to limit government spending and taxing as embodied in California's Proposition 13 and Massachusetts' Proposition 21/2 have squeezed local governments financially. With similar efforts underway at the state and federal level, the role of intergovernmental grants as a creative solution for local public service provision is diminished. The fiscal problem is further amplified by present discussions to shift program responsibilities from the federal level to state and local governments. In response to these fiscal pressures, public officials are turning increasingly to voluntary action by citizens in financing publicly provided goods and services as a means of maintaining (or even increasing) current public service levels. The coproduction literature has underscored the role of citizens' voluntary contribution of time in the production of publicly provided goods and services. While the purposes of the authors are varied, the timeliness of coproduction in today's era of fiscal constraint is a frequent theme.' If coproduction is to be viewed as an alternative to traditional methods of public service provision, then a comprehensive economic analysis is desirable. Coproduction is, in essence, a resource allocation process with potentially significant ramifications for the efficiency objectives of society; it should be subjected to the same scrutiny that public expenditure programs receive because it entails the use of scarce resources.2 From a public finance perspective, the preoccupation with the production of public services unnecessarily limits discussions to the technical aspects of the production of publicly provided goods and services. It is essential to broaden the scope of this inquiry. The more important issue is how to provide goods and services publicly. Provision entails determining what goods and services should be supplied and in what quantities as well as the method of financing those levels. Once these questions are decided then it is necessary to ask the question of how the goods and services should be produced. While the methods of provision and production are often interrelated they can and should be disentangled for analytical purposes.3