State and local finance in a command economy: the case of the soviet union

Two aspects of Western public finance, the economic theory of federalism and public choice theory, have insights that, if adopted in the Soviet Union, could help improve its resource allocation to permit economic growth, mitigate the problems it has with its minorities, and aid the transition away from a centralized, Communist-Party-dominated State and society. The economic reforms proposed by Chairman Mikhail Gorbachev are briefly summarized and criticized in the context of a summary discussion of governmental decisionmaking in the Soviet Union. Lessons are identified from the U.S. historical experience that suggest certain steps to improve local government as necessary preconditions for improving Soviet economic efficiency. These are free local elections, a free local press, an independent judiciary with real authority to protect the integrity of the press and local elections, real decentralization of political power to the regions, steps toward equalization of fiscal capacity among the regions, increased citizen mobility, and adoption of actions to provide incentives for Western investment in local government capital formation. This last precondition requires a convertible currency. (To achieve a convertable currency may require other economic and political changes that are beyond the scope of this paper.) Aspects of the paper rely on information publically available through mid-1989.     

Transformation of bureaucratic states in eastern europe: public expenditure lessons from latin America

Creation of functioning public administration systems in Eastern Europe is made difficult by the need to tear down the centralized, state-owned economy of the past 45 years, deal with existing fiscal and security crises, and build new administrative systems and analytic capabilities. This paper suggests that the core of such an effort should be a focus on public expenditure management improvements through innovative training and technical assistance. In Latin America, too often aid was focused on supplying information technology without attempts to overcome obvious constraints to demand for its use. Comparative analysis of public administration systems in both regions reveals the same problems of (1) overcentralization of management and intergovernmental relations which destroys decision-making legitimacy, and (2) legalistic and compliance-oriented administrative systems which destroys incentives to manage effectively. To avoid these problems in Eastern Europe, technical assistance should stress incentives for decentralized management, and more flexible fiscal controls at the center.     

Rentier fiscal crisis and regime stability: Business-state relations in the Gulf

Are sectorally dependent states destined to regime instability as a result of chornic fiscal crisis? Literature emphasizing the importance of a country’s sectoral endowment suggests that oil exporters in particular should exhibit similar policy stagnation and regime decay as a result of fiscal crisis. The cases of Kuwait, Qatar, and Bahrain in the 1980s and 1990s demonstrate that fiscal crisis outcomes are not uniform. This article develops the critique that structuralist assumptions about what drives business-state relations during crisis are flawed. Abstract logics typing exogenous price sifts to the character of business-state interaction neglect the historical and instituional grounding of those relations. It is variation in the historical and institutional crafting of business-state relations that best explains how these relations shape reform under crisis and how regime stability is affected.     

Public Sector Participation and Compliance across National and Global Transparency Regimes

Transparency has recently become a widely supported norm of information regulation within and among states. Transparency may be a widely accepted element of good governance, but it has a number of dimensions and manifestations. This article is among the first to examine the relationship between public sector transparency at the domestic and global levels. While the extant literature suggests that we should expect a strong relationship between the degree of a jurisdiction’s domestic and global commitments to public sector transparency, our sample of the 33 jurisdictions for which data are available finds no such correlation. The article develops an explanation of this unexpected finding, which highlights the varied incentives to implement transparency-promoting reforms that different jurisdictions experience. This analysis suggests that many developing countries engage in marginal participation across regimes. More concerning are possible cases of mock compliance where states participate in transparency regimes without the intention of fully implementing their commitments. Mock compliance is of particular concern in the sphere of global governance in which sovereignty is contested and compliance mechanisms face unique challenges.     

In-between anarchy and interdependence: from state death to fragile and failing states

International relations scholars concede a vital role for anarchy in structuring state behaviour towards survival. Anarchy provides strong incentives for power-maximising behaviour, since states that do not act accordingly risk death by conquest. This assumption raises an important question: if international anarchy is pervasive, leading to processes where only the fit survive, how do we explain the survival of fragile and failing states? Under conditions of self-help such states should be tempting targets, yet these vulnerable states avoid death by conquest. Fragile and failing states survive because international order is based on a sovereignty regime backed by major powers. International order is more salient than anarchy and provides better vantage points to understand the absence of state death. Elements of international order, like the relational hierarchies between dominant and subordinate states, no longer tolerate state death. This largely explains the survival of fragile and failing states.     

Perception of Pay Equity in Public Universities in Ghana: Effect on Individual Performance and Work Behavior

Equity theory proposes that individuals perceiving inequity seek to restore equity through appropriate behavior. This research aimed to study the relationship between perceived pay equity and individual job performance among lecturers in public universities in Ghana. Using a survey of 313 lecturers, we found that employees’ perception of equity in the pay system is a significant factor in determining their job performance. Therefore, we recommend that managers attend to equity in the design and implementation of pay systems. Moreover, issues relating to the reward system should be carefully communicated to employees in order to prevent unnecessary perceptions of inequity.     

TRANSFORMING NEW ZEALAND'S PUBLIC SECTOR: LABOUR'S QUEST FOR IMPROVED EFFICIENCY AND ACCOUNTABILITY

Since its election in July 1984 the fourth Labour government in New Zealand has embarked upon the most radical and systematic reorganization of the state sector since the creation of a unified, non-partisan, career-oriented service in 1912. The reforms include the commercialization of many of the goods and services provided by state agencies, the turning of public trading enterprises into corporations, major administrative changes and the overhauling of state pay-fixing arrangements. This article examines the theoretical assumptions underpinning Labour's strategy and assesses the extent to which the new arrangements are likely to achieve their intended purpose of improving the efficiency, flexibility and accountability of the public sector.     

Productivity and fiscal pressure

Under the pressure of fiscal crises, elected officials and their constituents are demanding that productivity improvement be institutionalized in government. Pressured public administration is responding with innovations ranging across measurement and auditing, joint labor-management cooperation, incentives tied to performance, training, information resources, microcomputer applications, and new means of financing productivity investments. Potential progress is limited, however, by bureaupathologies, private sector assumptions, capital underfunding, statutory or procedural obstacles, and labor-management differences. Nevertheless, public sector productivity programs promise to benefit all interested parties.     

How does ethnic diversity shape the design of intergovernmental fiscal relations? Evidence from China

This study examines how ethnic diversity shapes the design of intergovernmental fiscal relations in regimes such as China, where local accountability and resident mobility are largely absent. We argue that in these regimes, ethnic diversity largely captures potential social conflicts and instability, consequently requiring a higher level of fiscal centralization and regional equalization from upper-level governments to preserve social stability. Using provincial and sub-provincial level panel data from China for 1995–2019, we find strong supporting evidence that an increase in a province's ethnic diversity significantly increases fiscal centralization and the provincial government's fiscal equalization efforts. We also show that these effects tend to be stronger in provinces whose leaders have closer ties with the central authority and where local capture is less serious. Our study contributes to a better understanding of ethnic diversity's consequences on the policy choices governments make.     

Fiscal incentives and direct foreign investment in less developed countries

This study found no support for the belief by the governments of most less developed countries (LDCs) that the provision of fiscal incentives is necessary to attract direct foreign investment and that the greater the generosity of these incentive programmes the greater would be the level of such investment. What mattered were the presence of natural resources and a proven record of economic performance. The provision of incentives could not compensate for the absence of either of these two factors. The study is a cross‐sectional one of 27 LDCs for the period 1965–73.     

Performance-Related Payments in Local Governments: Do They Improve Performance or Only Increase Salary?

Personnel policies in public sector organizations are fundamental to improving public services, since they have an impact on both individual and organizational performance. Within the broad area of Human Resources Management (HRM), Performance-Related Pay Systems (PRPSs) are widely considered one of the cornerstones of public sector managerial reforms. Monetary incentives should be paid for performance achievements of single employees and/or teams, according to a defined set of objectives. While the role and appropriateness of PRPSs in the public sector have been widely discussed in the literature, in some countries monetary incentives have been used as a tool to increase individual salaries, without considering them as a motivating instrument in a wider HRM system. A small number of studies have been conducted to understand the limitations of this form of incentives and to investigate whether it can be replaced by different and more effective incentives in order to avoid the de-motivating effect caused by money, as recognized in the literature. This study tries to fill this gap investigating, through twenty-five interviews to informed respondents the effectiveness of existing PRPSs at Local government level in Italy both in terms of performance and motivation and the possibility to substitute monetary with non-monetary incentives. The findings suggest that the limitations of monetary incentives have been widely recognized, but it is still difficult to replace them with different and more effective alternatives.     

Crucial Decisions By Small Towns and Villages: Why Did Some Municipalities Choose to Merge But Others Did Not During the Nationwide Wave of Municipal Mergers in Japan?

This article focuses on the nationwide wave of municipal consolidations in Japan that took place from 2003 to 2006 and examines why some municipalities merged but others did not. The central government did not legally force consolidations but instead provided municipalities with fiscal incentives. I argue that small municipalities were reluctant to merge because they would lose generous transfers from the central government as well as decision-making powers once they unified with their larger neighbors. Fiscal incentives by the central government significantly raised the cost of remaining intact and induced a large number of fiscally weak municipalities to merge.     

The Flypaper Effect Revisited: Intergovernmental Grants and Local Governance

Abstract

Local governance arrangements shape the incentives of local actors, which may in turn influence fiscal choices. By emphasizing the role of local government institutions in local fiscal choices, we seek to bridge between median voter and Leviathan models prevalent in the literature. We then offer some preliminary evidence to support this explanation by empirically testing several propositions regarding the flypaper effect in intergovernmental grants. One limitation of the median voter model is that the model does not consider political institutions and their influences on government expenditures. In this study, we attempt to capture the influence of political dynamics in determining public expenditures by considering institutional variables. Test results show that the political institutional variables could be one of the explanation variables for the flypaper effect.     

Measuring horizontal fiscal imbalance: the case of Italian municipalities

In the literature on fiscal federalism, vertical fiscal imbalance has been widely studied, while the theme of horizontal fiscal imbalance and inequality among local governments, due to differences in their fiscal capacities, has been less explored. This article contributes to fill the gap. A new method to compute fiscal capacities based on regression analysis is proposed, which can overcome some of the drawbacks of traditional methods such as the representative tax system. This new approach is then employed to evaluate the fiscal capacities of Italian municipalities over the period 2002–2010. Finally two global measures of the horizontal fiscal imbalance are used to evaluate the equity implication of a major policy change occurred in 2008 in Italian municipal finance.     

A Response to Fiscal Stress: Public Sector Employment Reduction across States during a Budget Crisis

This paper incorporates measurements of the four financial condition dimensions of cash, budget, long-run, and service solvency to explore the link between financial condition and public sector employment among states in the context of the Great Recession of 2008–2009. The finding is that the severity of this economic recession led states to reduce public workers as one type of fiscal response to cope with budget shortfalls. The results suggest that not all dimensions of state financial condition affect public sector employment.     

The new public personnel and the new public service

The New Public Administration sought a public service whose legitimacy would be based, in part, on its promotion of “social equity.” Since 1968, several personnel changes congruent with the New Public Administration have occurred: traditional managerial authority over public employees has been reduced through collective bargaining and changes in constitutional doctrines; the public service has become more socially representative; establishing a representative bureaucracy has become an important policy goal; more emphasis is now placed on employee participation in the work place; and legal changes regarding public administrators’ liability have promoted an “inner check” on their behavior. At the same time, however, broad systemic changes involving decentralization and the relationship between political officials and career civil servants have tended to undercut the impact of those changes in personnel. The theories of Minnowbrook I, therefore, have proven insufficient as a foundation for a new public service. Grounding the public service's legitimacy in the U.S. Constitution is a more promising alternative and is strongly recommended.

The New Public Administration, like other historical calls for drastic administrative change in the United States, sought to develop a new basis for public administrative legitimacy. Earlier successful movements grounded the legitimacy of the public service in high social standing and leadership, representativeness and close relationship to political parties, or in putative political neutrality and scientific managerial and technical expertise. To these bases, the New Public Administration sought to add “social equity.” As George Frederickson explained, “Administrators are not neutral. They should be committed to both good management and social equity as values, things to be achieved, or rationales. “⁽¹⁾ Social equity was defined as “includ[ing] activities designed to enhance the political power and economic well being of … [disadvantaged] minorities.” It was necessary because “the procedures of representative democracy presently operate in a way that either fails or only very gradually attempts to reverse systematic discrimination against” these groups.⁽²⁾

Like the Federalists, the Jacksonians, and the civil service reformers and progressives before it, the New Public Administration focused upon administrative reform as a means of redistributing political power.⁽³⁾ Also, like these earlier movements, the New Public Administration included a model of a new type of public servant. This article sets forth that new model and considers the extent to which the major changes that have actually taken place in public personnel administration since 1968 are congruent with it. We find that while contemporary public personnel reflects many of the values and concerns advanced by the New Public Administration, substantial changes in the political environment of public administration have frustrated the development of a new public service that would encompass the larger goals and ideals expressed at Minnowbrook I. Building on the trends of the past two decades, this article also speculates about the future. Our conclusion is that ultimately the public service's legitimacy must be grounded in the Constitution. Although its focus is on macro-level political and administrative developments, the broad changes it discusses provide the framework from which many contemporary personnel work-life issues, such as pay equity and flexitime, have emerged.     

Improving local infrastructure finance in developing countries through grant-loan linkages: ideas from indonesia's water sector

In recent years, developing countries under fiscal pressure have increasing recognized significant weaknesses in their intergovernmental mechanisms for financing local infrastructure. Many countries are in the process of rationalizing poorly coordinated and subjectively allocated grant systems as well as loans. Such efforts, however, are typically undertaken independently of each other, often providing conflicting incentives for local fiscal behavior. I argue that the reform of grant and loan mechanisms should be explicitly linked to improve the overall effectiveness of the infrastructure finance system. The potential complications involved in designing grant-loan linkages, however, are considerable. I illustrate some key issues by examining the water sector in Indonesia, concluding with suggestions for how to think about creating such linkages in other sectors and countries.     

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.     

Economic partnering with the poor: why local governments should work with community-based development organizations to promote economic development

Much of conventional economic development ends up as a transfer of wealth from the public sector to successful firms. Instead, local governments would be better off working to support the efforts of community-based development organizations to expand the economic pie for those most in need. Suggestions are made of ways to bring about equity development programs that would help those most in need rather than merely subsidizing established businesses.     

Reconstructing and Reforming the Financial System in Conflict and ‘Post-Conflict’ Economies

Reconstructing the financial system in countries affected by violent conflict is crucial to successful and broad-based recovery. Particularly important tasks include: currency reform, rebuilding (or creating) central banks, revitalising the banking sector, and strengthening prudential supervision and regulation. Encouragement of private capital into the banking sector must be balanced by protection of the public interest, a task made more difficult by the nature of war-to-peace transition. Bank crises can destabilise economies in recovery from war, and their fiscal burden takes resources away from development and poverty spending – thereby threatening ‘post-conflict’ reconstruction itself.