The Determinants of Local Government's Financial Transparency

This paper contributes to the scarce literature on government transparency by analysing the impact of political and socio-economic factors on municipal financial transparency. Our sample covers the 100 largest Spanish municipalities in 2008. Compulsory publicity and transparency are key to public management (rule-of-law theory). Our data show that Spanish municipalities are providing financial information beyond the legal requirements, thus exceeding the compulsory disclosures required by the rule-of-law theory. The more taxes and more transfers per capita, the more financial information is disclosed and, accordingly, the higher the transparency is. Therefore the municipalities are not taking advantage of fiscal illusion or principal–agent effects, since they are not concealing higher levels of taxes and transfers from citizens. Furthermore, left-wing parties are more transparent than right-wing ones. Finally, the population also has a positive effect on the achievement of financial transparency.     

Analysing credit risk in large local governments: an empirical study in Spain

In governments throughout the world, bank lending excesses, solvency issues and worsening credit ratings have all contributed to raising risk premiums and impeding access to credit, thus provoking a major financial problem in the public sector. Accordingly, tax authorities and regulators need to analyse the causes of public sector bank debt, doing so through the joint study of idiosyncratic and systematic variables, an area that has been neglected in previous research. This paper examines idiosyncratic and systematic factors that may influence local government credit risk through an empirical study of the performance of 148 large Spanish municipalities during 2006–2011. We identify individual factors relevant to the probability of local government default (such as dependent population, per capita income and debt composition) and also determinants associated with macroeconomic developments, such as gross domestic product and the risk premium.     

Do the illegal and legal rents of politicians affect municipal election outcomes? Empirical evidence

This paper aims to analyse whether illegal (corruption) and legal rent extraction (high politicians’ wages) affect electoral outcomes at municipal level. We use an initial sample of 145 Spanish municipalities over 50,000 for two electoral periods: 2004–2007 (before the crisis) and 2008–2011 (during the crisis). Our findings show that neither illegal nor legal rent extraction impact on re-election in non-crisis times. However, we observe that citizens penalize legal rent extraction in the ballots during the crisis. Regarding the economic performance of the local governments, we find that its effect on re-election is important in non-crisis period. Nevertheless, in time of crisis, given that the economic situation is bad in general in the country, voters pay less attention to economic factors and focus on politicians’ behaviour.     

Do Electoral Risks Moderate the Effect of Partisan and Electoral Cycles on Debt-Financed Local Spending?

Governments’ use of debt as a political instrument has been widely studied from the perspective of partisan and electoral cycles, mainly concerning central government. On the whole, previous studies have attempted to determine the effects of political ideology and the proximity of elections on the opportunistic use of public spending. The current study aims to broaden the scope of attention to the effect of partisan and electoral cycles on debt, by means of a broader consideration of the motives that lead politicians to take on a deficit and that are usually linked to the associated electoral risk. More particularly, we examine whether, during the electoral period, greater confidence in re-election can modify party behaviour concerning the use of public spending, and if so, whether the change is greater or smaller depending on the ruling party’s ideology. The results obtained show that local administrations need to incur debt, although politicians take on more liability than is appropriate to their demographic and economic characteristics, especially in an election year. It was also found that political stability favours a reduction in the public deficit, a pattern that is maintained in electoral periods. This effect was found to be independent of the partisan cycle.     

Dynamic-opportunistic behaviour in local government contracting-out decisions during the electoral cycle

A major question for public managers is whether municipal services should be rendered in-house or contracted out. In view of the negative perceptions often aroused by contracting out, this political decision might be framed within a theoretical model that we term ‘dynamic-opportunistic behaviour’. According to this model, the probability of municipal services being contracted out is greater in the years immediately following elections; moreover, during this period the decision is taken more quickly. In this theoretical model, not all factors (budgetary, economic, political, service characteristics and socio-economic) have an equal impact on the contracting-out decision during each year of the electoral cycle. The model was applied to a sample of 2,274 Spanish municipalities, with respect to a broad time horizon (2002–2014), and the results obtained confirm our hypotheses regarding dynamic-opportunistic behaviour in the contracting out of local public services.     

The impact of functional responsibility and state legal constraints on the “revenue-debt” packages of U.S. Central cities

State governments have the power to restrict the revenue and debt sources available to their municipalities. States also have the power to assign functional responsibilities to their municipalities - - some of which can be extremely burdensome financially (educatin; welfare; hospitals). This research examines the effect of these state constraints on: (1) the revenue-debt use patterns; and (2) the fiscal condition of 243 U.S. central cities (FY 1974, FY 1975, 1976).

The results show that the revenue/debt use patterns of cities vary signigficantly according to the restrictions imposed by the state on their taxing, borrowing, and functional responsibility powers. In addition, revenue/debt use patterns differ among ciites experiencing varying levels of distriess. Severely distressed cities are more dependent on external revenue sources (federal, state). They are less capable of generating revenue at the local level and are less flexible in their use of local revenue soruces, depending more hevily on the property tax and less heavily on nonproperty tax and nontax revenue sources than healthier cities. They are also found to be more reliant on full faith and credit (property tax-backed) long-term debt and on short-term debt than the more prosperous cities.

Cities in states imposing heavy restrictions on use of property tax and full faith and credit long-term debt sources but imposing few restrictions on municipa; nonproperty taxing powers are generally the healthiest fiscally. Such state policies have effectively enhanced municipal diversification of both traditional revenue sources and debt sources.

The major significance of this research is the demonstration that state governments have within their policy-making power the ability to affect the fiscal dependency level of their respective municipalities. An activist role is necessary on the part of state governments if they wish to increase their role in municipal fiscal affairs relative to that of the federal government.     

Analysing Local Political Management in Spain

This article examines the strong mayor form of local political management in Spain. Drawing on empirical research conducted with members and officers in a Spanish municipality, the system is analysed according to leadership, representation and responsiveness, accountability, scrutiny, and decision-making. It finds that the model underpins concentrated individualised leadership exercised by the mayor. Representativeness and responsiveness in the system are hampered by the absence of electoral divisions within the municipality, meaning citizens do not have their own councillor, and by there being no institutionalised system of citizen participation or decentralisation. Elections every four years serve to hold incumbent mayors to account, and the full council has the power to recall the mayor, though such a recall is unlikely. There is little detailed scrutiny of the performance of the municipal government. It is argued that the security of tenure enjoyed by Spanish mayors is unlikely to be replicated in England, and that there is some concurrence in Spain with reform trends observed elsewhere.     

Curse or Blessing? Has the Impact of Debt Relief Lived up to Expectations? A Review of the Effects of the Multilateral Debt Relief Initiatives for Low-Income Countries

As the multilateral debt relief initiatives draw to a close, this article reviews the impacts of debt relief to low-income countries (LICs) building on both the theoretical and empirical literature of past decades. We show that, while the pioneering studies of the early 2000s are inconclusive, the most recent analyses overcome certain methodological impediments to highlight significant multilateral debt relief initiative effects. These analyses hence suggest that these large-scale programmes may well have met expectations, at least in part.     

Testing for Fiscal Illusion in Wisconsin Towns

Fiscal illusion, a theory of the impact of government revenue structures on voter decision-making, has been studied extensively by economists and political scientists; however, empirical verification has been limited. This study builds on Lowery's (1987a) work by examining the relationship between suggested illusionary revenues and measures of electoral stress. Here, electoral stress is measured as constituent contacting—one possible measure of voter influence—for local government officials up for re-election. Using a combination of survey data from over 1,000 Wisconsin town board members, audited fiscal data and U.S. Census data, we were able to test for fiscal illusion. Our findings show that when looking at five revenue types (conditional grants, unconditional grants, property taxes, user fees and charges, and debt service) there is some evidence suggesting officials seeking another term in office will tend to support fees and charges as a revenue structure over other structures. Overall, there is little consistent evidence suggesting that elected officials are manipulating revenue structures for electoral gain. Revenue structures are mostly influenced by social and economic factors, such as median household income, population changes, and per capita property valuation.     

What are the Local Political Costs of Centrally Determined Reforms of Local Government?

Taking advantage of a quasi-experimental setting and drawing upon analysis of electoral results and a survey of voters, this article explores the political costs of reform through the example of the 2009 local elections in Denmark. The article finds that the local parties of mayors were punished at the polls for implementing municipal amalgamations decided by the central government. However, the effect on the mayoral parties’ electoral result is more indirect than direct. Analyses of the electoral results demonstrates that the political parties holding the mayoralty in times of amalgamations tend to nominate very tenured mayors as candidates, thereby missing the positive first-term incumbency effect, which a new mayor could have acquired. And analyses of a survey of voters demonstrates higher levels of dissatisfaction with the municipal service in amalgamated municipalities, leading to a higher cost of ruling for mayoral parties which have led the implementation of an amalgamation.     

The relationship between competition and efficiency of waste-collection services in the Czech Republic

This paper examines the role of the competition on the waste-collection market. Based on the case study of the Czech Republic, we evaluate the influence of competition intensity on supply side of the market on efficiency of waste-collection services. The rate of competition was approximated by the number of submitted bids to public tenders and efficiency was measured by per capita expenditures for municipal waste-collection services. We developed two regression models – the first model verified a competitive effect on the public procurement market for the provision of waste-collection services; the second model identified factors that affected municipal expenditures for waste-collection services per capita. We concluded that the competition in the waste-collection market increases by organising open tenders for suppliers at regular intervals, by adapting the duration of contracts to economic life of fixed assets, by sustaining pressure on service providers through a change in suppliers or the distribution of contracts among jurisdictions.     

Who votes for mayor? Evidence from midsized American cities

Who, or what, governs the mosaic of the almost 39,000 general purpose local governments across the United States? While the determinants of voter turnout in both national and sub-national elections have been well studied, there is a dearth of empirical literature examining voter turnout at the municipal level. Utilizing an original dataset of 356 midsized US cities drawn from the Midwest, South, and Northeast regions, this paper ponders the drivers of mayoral turnout, and asks if electoral timing, competitiveness, or characteristics of the electorate best predict turnout. Sequenced hierarchical linear models and OLS regressions are employed to control for sub-national effects, and model results indicate that election timing greatly dictate who governs midsized American cities. While local competitiveness and characteristics of the electorate also matter, their explanatory value is greatly over-shadowed by timing.     

The Impact of the Housing Bubble on the Growth of Municipal Debt: Evidence from Spain

The aim of this paper is to analyse the impact of the recent Spanish housing boom and the subsequent burst on local public finances. Particularly, we investigate the effect of the rise and later fall in revenue from urban development on local government debt. Using a sample of the Spanish largest municipalities in the period 2003–2011, we find that debt was substituted by revenue from urban development during boom years and this substitution effect vanished after the burst of the boom. Our results also reveal that local public finances have worsened after the burst of the housing bubble since now they have larger current spending and smaller savings.     

The impact of revenue diversification on municipal debts: comparing short-term and long-term debt levels

The extant literature has offered two competitive implications of revenue diversification: revenue stabilisation and fiscal illusion. Stabilisation helps governments have less revenue volatility, while fiscal illusion expands tax burdens through the increase in expenditure. The competitive views on revenue diversification leave a niche to explore the association between revenue diversification and debt levels in local governments. We estimate the static and dynamic effects of revenue diversification on both short-term and long-term debt levels in 150 fiscally standardised cities. Our findings show that local governments with greater revenue diversification are more likely to reduce short-term debts while expanding long-term debts. The findings imply that a stabilised revenue structure helps local governments better manage operational budgets but also invest in capital projects with greater debt capacity.     

The Impact of War on Calorie Food Demand in Bangladesh

Daily per capita calorie intake in Bangladesh averaged almost 2,100 (kilo)calories in the 1960s but fell to 1,840 in 1972 following the war of independence in 1971, and only by 1987 did it reach 2,000 again. This article examines the long-run relationship between per capita income, food prices and per capita calorie intake using aggregate data for Bangladesh for 1962–97 and the recent cointegration procedure of Johansen et al., which permits structural breaks. Results show that a long-run relationship exists and that the war reduced average calorie intake permanently by 10 per cent. Impulse responses show that income Granger-causes calorie intake but not vice versa.     

From the Executive Board to the Classroom. What Debt Relief Means for Education in the Democratic Republic of the Congo (DRC)

ABSTRACT

This analysis re-assesses the IMF’s decision to grant debt relief to the DRC in 2010 based on the country’s poverty reduction and growth performance: would the IMF come to the same conclusion given the current knowledge available about the impact of the debt relief process on public governance and service delivery? First, it shows that, whereas the direct resource effect of this aid modality was minimal, the indirect effect was more significant: the conditionalities attached to the process helped to stabilize the economy and increased the overall budget of the Congolese state. This increased resource availability also sustainably percolated to the education sector. Second, however, the impact on social development was minimal: school enrolment increased but was hardly accompanied by extra budget per pupil, whereas more complicated challenges like disparities in access or quality of schooling were left untouched. The government’s strategy was also partly short-circuited by the electoral process.     

Can the cultural environment affect governmental transparency on sustainability? Useful measures for policy makers and practitioners

The aim of this study is to provide useful knowledge to policy makers and practitioners on how to promote the practices of sustainability transparency in local governments, based on the influence of the cultural environment on the disclosure of governmental information on sustainability, including social, environmental and economic information. We perform a comparative analysis of the effects of four types of variables (demographic, sociological, economic and financial) on the disclosure of information on sustainability in two different contexts: Anglo-Saxon and Nordic administrative cultures. Our results show that the factors of the administrative culture context do influence practices of transparency on governmental sustainability. In the Anglo-Saxon environment, the explanatory variables are population size, dependent population and education level. For the Nordic area countries, the main variables are unemployment, dependent population, financial autonomy and debt per capita. Taking into account the study results obtained, we propose measures to facilitate the dissemination of sustainability information in each cultural environment.     

Political Competition and Local Social Spending: Evidence from Brazil

Electoral theories of democracy imply electoral competition insures accountability. Using data on local elections, socioeconomic factors, and municipal budgets from more than 5,000 municipalities in Brazil for the years 1996, 2000, and 2004, we find that municipalities with more competitive elections allocate less to social spending compared to municipalities with little political competition. We argue that previous theory on political competition and public goods obscures the critical role that financial resources play in shaping the dynamics of social spending and political competition. Municipalities with small budgets lack the resources necessary to engineer convincing electoral victories. Where resources are negligible, voter turnout is low, and incumbents rarely win reelection. Incumbent parties in municipalities with large financial resources win big. Armed with adequate resources, incumbent parties mobilize voters and win by large margins. This new argument and evidence reconcile contradictory findings in the existing literature on competition and public goods.     

Is there a long‐run relationship between population growth and living standards? The case of India

This note examines the existence of a long‐run, cointegrating relationship between population and per capita GDP in India for 1950–93. Unit root tests show that per capita GDP is integrated of order one while population is integrated of order zero; further, estimation of the bi‐variate relationship using the cointegration procedure of Johansen shows that no long‐run relationship exists. Thus, population growth neither causes per capita income growth nor is caused by it. A corollary is that population growth neither stimulates per capita income growth nor detracts from it.