A Survival Analysis of U.S. Municipalities in Fiscal Distress

This article uses survival analysis to investigate fiscal distress in U.S. municipalities. We hypothesize that fiscal distress is positively correlated with revenue concentration and debt usage, and negatively correlated with administrative costs and entity resources. We develop a model that can predict the likelihood of fiscal distress and correctly classify up to 86 percent of the sampled governments. The model enables users to analyze the impact of a change in the risk factors. Fiscal distress can be reduced most effectively by increasing tax revenues as a percent of total revenues or decreasing total debt as a percent of total revenues.     

Market-Oriented Reforms as a Tool of State-Building: Russian Pension Reform in 2001

Despite domestic opposition and several policy alternatives, in 2001 the Russian government adopted a pension reform that was potentially costly and had uncertain long-term benefits. Demographic and fiscal pressures created the desire to reform and a more cooperative Duma made it possible to do so. These points do not explain why Putin chose the pension privatisation option. Russia's pension reform is best understood as part of a state-building strategy to diminish the role of powerful bureaucracies. Russia's welfare state was not merely the product of a powerful and popular president, but rather a tool to create a stronger executive.     

Can alternative service delivery save cities after the Great Recession? Barriers to privatisation and cooperation

ABSTRACT

Cities continue to face fiscal challenges after the Great Recession and alternative service delivery is being emphasised as a solution. How promising is alternative service delivery as a solution and what are its barriers? Regression analyses using 2012 survey data of US local governments show that local governments manage procedural barriers, but structural barriers of economy and demography hinder privatisation and cooperation. Places with a housing bust (measured as decline in home values) can use privatisation, but not places with more or increased poverty. Cooperation is more promising for places with increased poverty, but lack of a willing partner hinders this spatially constrained tool. Neither cooperation nor privatisation is promising for places with low home values. State governments must level the playing field for localities with weak economies if market approaches to service delivery are the main tools for local governments to survive fiscal stress.     

Local Fiscal Stress in Sub‐Saharan Africa: The Kenyan Example

Abstract

This article identifies the fiscal weaknesses of local government in Africa, with concentration of the fiscal stress that is endemic to their condition. It then examines Kenya, as a case study in sub‐Saharan Africa. It continues to focus down on three Kenyan cities—Nairobi, Mombasa, and Kisumu, and identifies their six major revenue sources: land based revenues, regulatory revenues, income‐based taxes, service revenues, user charges, and government grants. Although some of the data is problematic, it is possible to determine several reasons for local fiscal stress. These reasons include limited access to stable financial resources, unstable national economic performance, centralized governmental control, mixed results of decentralization, and institutional and managerial weaknesses, including corruption in the collection and use of resources. Four recommendations are advanced to help these local governments: the development of local credit systems, the use of non‐governmental organizations, the clarification of the use of foreign aid, and the development of a greater capacity for governance. This articles main theoretical contribution is the development of an analytic framework for examining the reasons for fiscal stress in sub‐Saharan Africa. By examining revenue and expenditure patterns of the three localities, the article develops a data set that highlights some of the reasons for local government financial problems—the governments do not know how much revenue can be collected from a particular revenue source, they do not have records of existing sources of revenue, and they only collect about 40–60% of their estimated collections.     

What have we learned from the last three decades of empirical studies on factors driving local privatisation?

Scholarly empirical studies on factors that motivate local privatisation have greatly grown in the last decade. As well, having available better and more comprehensive databases and using more refined empirical techniques have made possible to enhance our understanding of the dynamics of local privatisation, particularly in many European countries. The influence of fiscal stress, cost considerations – scale economies as well as transaction costs – and political partisan interests is usually confirmed. Furthermore, ideological attitudes appear to be more influential than they seemed to be, particularly when considering social services, rather than the technical ones.     

Dependency,the state and class in the neoliberal transition of Taiwan

The remarkable economic growth in Taiwan has served as a model of the developmental state as well as a source of scepticism about neoliberal policy for many less developed countries. However, since the mid-1980s Taiwan has gravitated from its previous statist model to the universally embraced 'market-orientated' restructuring. This study seeks to explain this neoliberal transition. A disaggregated approach is employed to break neoliberalism down into three distinct dimensions: market openness, fiscal austerity, and privatisation of public sector enterprises. The analysis results confirm that: (1) Taiwan's trade dependency on the USA constituted a decisive factor in the state opening its domestic market; (2) distributional politics was forged in a new but weak democracy to incorporate more interest groups in the fiscal expansion of the post-authoritarian era; and (3) the slow but increasingly steady progress of privatisation plans was influenced not by a 'back-to-the-market' idea but by the statist legacy with which bureaucrats attempted to manage public sector enterprises even after they became de jure private firms. The theoretical implications of this transition are discussed in the conclusion.     

Adjustments in municipal fiscal crises. Are they different according to the gender of the mayor?

The literature on gender has attempted to explain the differences between the public outcome depending on whether the ruler is male or female, on the basis that men and women have different preferences. This scientific research has not yet examined issues related to fiscal crises, and our research aims to fill this gap. In a context of generalised economic crisis, our research examines if the gender of the mayor affected the fiscal adjustment policies carried out by municipalities with fiscal deficits in the Spanish region of Galicia. Our paper suggests that although gender of the mayor does not seem to have affected the level of adjustment in total current expenditure, it does seem to have influenced the way in which social and non-social spending were adjusted. Our study also highlights that female mayors are associated with lower levels of tax revenues and this could slow the adjustment processes of fiscal imbalances.     

European Media Coverage of Argentina’s Debt Default and Recovery: distorting the lessons for Europe

In 2001 Argentina defaulted on its debts and then devalued its currency by abandoning the peso–dollar peg. The economy rebounded and has grown relatively strongly since then. This paper uses a critical political economy approach to first show that the Argentinian strategy finds support in the literature examining the effects of sovereign debt default, currency devaluation and fiscal consolidation on economic growth. Argentina is thus relevant to Europe’s ongoing crisis. The article then investigates European media coverage of the Argentinian experience through an examination of major newspapers’ stories between 2008 and 2013. It argues that the media have distorted the lessons of the Argentinian recovery by focusing on the negative consequences of default rather than its benefits; by emphasising the role of rising commodity export prices over domestic policy decisions in stimulating the economy; by opposing some aspects of government intervention in the economy even if the latter played a beneficial role; and by exaggerating the negative consequences of inflation. This distorted coverage is explained through reference to the media’s ideological role in the implementation of austerity policies in Europe.     

What Should We Do? Public Attitudes about How Local Government Officials Should Confront Fiscal Stress

Despite strong scholarly interest in the topic of fiscal stress, little attention has been paid to understanding how the general public thinks local governments should respond to situations where declining revenues endanger service levels. This study reports findings from a survey of 660 residents undertaken between November 2006 and January 2007 in the US state of Michigan to examine their support for eight potential strategies to cope with fiscal stress in five different local government services. We find that the public has a surprisingly nuanced perspective about these strategies and on their use for different services. Our findings may provide local policymakers with some insights about how to respond to fiscal stress.     

Management Discretion and Political Interference in Municipal Enterprises. Evidence from Italian Utilities

The attention of scholars and policy-makers is shifting from full privatisation to alternative measures as a means to improve the efficiency of public services. This article focuses on three restructuring measures adopted by local governments: partial privatisation (without transfer of control rights), inter-municipal joint ventures, and the presence of outside directors on the Board. Divergent hypotheses on these measures have emerged from two economic theories, namely public choice and the agency perspective. An empirical analysis investigates the effects of restructuring processes on a sample of Italian municipal utilities. Partial privatisation has been shown to play a significant and positive role, while Board independence from management has a less significant influence. Multi-government utilities have been found to suffer from severe coordination costs, which are not outweighed by scale benefits. Our findings reveal that management discretion is a significant source of inefficiency in municipal enterprises.     

Biased Budgeting in the Public Sector: Evidence from Italian Local Governments

Abstract

The purpose of this paper is to analyse, in terms of presence, determinants and purposes, the misrepresentation of expected revenues during budget formulation and the misrepresentation of actual revenues during budget execution. To this end, we use six-year panel data from Italian municipalities with populations above 15,000. Our results suggest that overestimations of current revenues are more frequent than underestimations, during both budget formulation and budget execution. In terms of determinants, our results highlight the impact on revenue misrepresentation of both political orientation and fiscal stress. Finally, in terms of purposes, we show that revenue underestimation during budget formulation and revenue overestimation during budget execution may contribute to the formation of surpluses. The former, in particular, may allow mayors to create a ‘war chest’ in non-election years, which can then be used to increase net borrowing on the eve of elections.     

Restoring Fiscal Balances Post the Global Economic Crisis in Botswana

This article discusses the restoration of fiscal balances in Botswana after prolonged deficit financing. Botswana is a diamond-export-dependent country; resultantly, it suffered revenue losses due to depressed demand for diamonds during the global economic crisis. Reduced revenues necessitated deficit financing between 2008/09 and 2011/12. Debt was financed through dissaving and borrowing. However, the government restored budget balances in April 2012. While this case study is Botswana-specific, there are general lessons. These are: using a crisis to introduce public finance reforms; eschewing populism aimed at short-term gains; and the need for politicians to take very bold decisions to guide fiscal policy.     

The political determinants of fiscal policies in the states of India: An empirical investigation

Using data from the 14 major states of India, we investigate whether state governments' fiscal policy choices are tempered by political considerations. Our principal findings are twofold. First, we show that certain fiscal policies experience electoral cycles: state governments raise less commodity tax revenue, spend less on the current account, and incur larger capital account developmental expenditures in election years than in all other years. Second, we show that coalition state governments raise less own non-tax revenues and spend less on the current account than state governments that are more cohesive in composition. In sum, the dispersion of political power affects government size.     

Professionalism and public administration: A bibliography

Abstract

This paper tests public budgeting to ascertain if it has both a long‐run equilibrium and short‐run incremental process. In the model, the decision‐maker strives to achieve budgetary balance over the long‐run but is constrained in the short‐run and follows incremental decision‐making. The interaction between expenditures and revenues, along with several control variables, is tested for each of the Canadian provinces using data between 1961 and 2000. The results show that in the long‐run, expenditures force the budget toward balance in all the provinces with the exception of British Columbia. In that province, there was a fiscal synchronization of revenues and expenditures working in combination. In the short‐run, incrementalism occurs in nine of the ten provinces.     

The Great Survivor: The Persistence and Resilience of English Local Government

This article is about the persistence and resilience of the form of local government that emerged in England in the nineteenth century and took shape in the twentieth century. English local government has adapted to successive reorganisations and changes to its functions; it has survived centralisation, privatisation, the imposition of quangos, regional governance, elected mayors, performance management and latterly fiscal austerity by responding to opportunities and meeting the continual need for administrative tasks at the local level. The centralised structure to political management in English local government has generated a high level of organisational capacity and a pragmatic sensibility that ensures the institution remains in place even in unpropitious circumstances. Other local organisations, such as voluntary sector bodies and quangos, have less capacity to compete and work to shorter timescales. Such resilience has come to the fore in the period of fiscal austerity since 2009 when local authorities have had to manage severe declines in their budgets whilst taking on additional functions, such as council tax benefit. The organisational capacity and pragmatism of English local government create path dependence as its very efficiency at managing services may have shut off options for democratic renewal and participation.     

Privatised Firms and Labour Outcomes in Emerging Markets

A recent large firm-level dataset is analysed to compare labour indicators of privatised, private, and public firms around the world, in particular differences relating to wages, benefits, labour composition, education and training, unionisation, and quality of management. We find that labour productivity and the ratio of permanent to temporary workers increase after privatisation.     

Fighting Tax Evasion in Latin America: the contrasting strategies of Chile and Argentina

In the 1990s both Chile and Argentina embarked on efforts to tackle tax evasion. The strategies they pursued differed substantively: Argentina followed a coercive approach that created an elite audit team endowed with special legal powers, while Chile undertook a less spectacular service-oriented approach that improved the fiscal pact between state and society and enacted tax administration reform. Chile succeeded in permanently lowering tax evasion levels, while Argentina's success was short-lived and evasion levels soon returned to previous heights. Besides important differences in the institutional strength of these countries, the contrasting outcomes can be attributed in no small measure to the different strategies adopted. Their experience can provide some useful lessons in the elusive battle against tax evasion in Latin America.     

Manipulating Politics: Domestic Investors in Ukrainian Privatisation Auctions 2000–2004

This article focuses on political aspects of Ukrainian privatisation auctions during the presidency of Leonid Kuchma. It contributes to a discussion of the role of big national investors, or so-called oligarchs, in the context of a regime of competitive authoritarianism in Ukraine. A quantitative evaluation is made by means of an assessment of the values of the winning bids in the privatisation auctions under Kuchma and this is linked to a characterisation of the successful bidders in terms of their links to oligarchical networks. As a result distinct strategies of the Yushchenko and the Yanukovych governments towards auctions and towards oligarchs in general can be identified.     

Market cycles,power politics and the latest North – South energy trade conflict

Energy trade periodically aligns Northern importing – consuming countries against predominantly Southern producing – exporting countries. Conflict appears to follow a cyclical pattern, whereby Northern firms invest in developing Third World hydrocarbon resources to meet consumer demand until market conditions enable unilateral efforts by host sovereigns to augment fiscal take and ownership share and to impose output restrictions, thereby elevating prices and revenues. Although markets eventually correct themselves, major consuming-country governments, to the extent that seller's markets attributable to exporter actions harm short-term consumer welfare and alternative options for restoring buyer's markets are lacking, have varying incentives to support military intervention. Shifting market conditions and power balances suggest six ideal-typical energy trade conflict strategies. Finally, to the extent that exporting states succeed in converting higher hydrocarbon revenues into energy-intensive economic growth, co-operative phases within this conflict pattern could yield to increasingly zero-sum inter-consumer rivalry.     

Parties,ideology and elections: the politics of federal revenues and expenditures forecasting

Some scholars view problems in the accuracy of federal fiscal forecasts as being largely technical in nature .Others intimate that there may be a political component as well. This paper exlpores the relative merits of these two perspectives finding some support for each. Executive forecasts were found to be random with respect to direction of errors , error magnitudes increased in absolute terms over time , and revenues estimate error s tended to cluster in short bursts. Executive forecasting errors were also linked to presidential party , ideology and year in the election cycle.