Determinants of Pay‐as‐You‐Go Financing of Capital Projects: Evidence from the States

Although states have long practiced pay‐as‐you‐go in financing their capital projects as a supplement to debt, academia has paid scarce attention to pay‐go financing. This study fills in the niche by providing empirical evidence on what determines the use of pay‐go in financing capital projects. It develops a model that considers the preferences of both voters and politicians when they make capital financing decisions in a given institutional setting. The empirical results suggest that the use of pay‐go is affected by a state's income level, its economic conditions, the presence of a divided government, as well as its budgetary institutions.     

Capital Budgeting and Management Practices: Smoothing Out Rough Spots in Government Outlays

Public capital budgeting and management literature recommends long‐term capital and fiscal planning practices to prevent large fluctuations in outlays caused by fiscal stresses. This study extends the literature by examining the effects of long‐term capital planning and management practices such as the use of a capital budget, separate impact analyses, and the use of bond financing and dedicated revenue sources on capital spending volatility. The empirical results confirm that several of these practices smooth out state government capital outlays that vary because of socio‐economic and financial factors.     

Social Security: Reliance on Cash Flow Accounting and Projections Disguises an Inherent Upside Cash Flow Bias

The federal unified budget reports social security program results on a cash flow basis. Policy is established through projections of cash flows for 75 years into the future. This paper discusses how reliance on cash flow accounting and projections disguises an inherent upside cash flow bias that makes the program's finances appear better than they actually are and, when combined with the long‐standing pay‐as‐you‐go funding policy, leads to periodic solvency crises. The paper does not propose changing the budgetary accounting basis from cash to accrual but does explore the possible application of accrual accounting to the social security program for reporting purposes.     

On‐Bill Financing Programs to Support Low‐Carbon Energy Technologies: An Agent‐Oriented Assessment

On‐bill financing (OBF) schemes have been welcomed as innovative mechanisms for encouraging the adoption of low‐carbon energy technologies. Yet while the potential effects of these schemes have received growing attention, less is known about their actual performance. Departing from New Institutional Economics and insights from Behavioral Economics, this theory‐driven assessment examines the How$mart^® program in Kansas (United States) and the Green Deal in the United Kingdom. The study identifies the mechanisms designed to trigger behavioral change and technology adoption. We focus on market agents, and related market failures and behavioral anomalies that often prevent energy efficiency improvements. The paper adds to our theoretical and empirical understanding of public and utility‐driven OBF programs applied to the residential sector. Our findings suggest that simple, carefully designed on‐bill programs, where the financing of efficient technologies takes the form of a service rather than a loan, are more effective for the diffusion of low‐carbon energy technology and the reduction of transaction costs. At the same time, on bill‐financing schemes challenge the core business of utilities, and given the complexities and dynamics of energy efficiency markets and energy use, other policy interventions are needed.     

Civil War and Social Cohesion: Lab‐in‐the‐Field Evidence from Nepal

We study effects of wartime violence on social cohesion in the context of Nepal's 10‐year civil war. We begin with the observation that violence increased levels of collective action like voting and community organization—a finding consistent with other recent studies of postconflict societies. We use lab‐in‐the‐field techniques to tease apart such effects. Our causal‐identification strategy exploits communities' exogenous isolation from the unpredictable path of insurgency combined with matching. We find that violence‐affected communities exhibit higher levels of prosocial motivation, measured by altruistic giving, public good contributions, investment in trust‐based transactions, and willingness to reciprocate trust‐based investments. We find evidence to support two social transformation mechanisms: (1) a purging mechanism by which less social persons disproportionately flee communities plagued by war and (2) a collective coping mechanism by which individuals who have few options to flee band together to cope with threats.     

Money for our people? Decentralisation and corruption in Romania: the cases of the equalisation,infrastructure and pre‐university education funds

In spite of the attempts, in the most recent years, to introduce simple, accountable and rule‐based mechanisms governing the flows of funds for Romanian local governments (LGs) there is evidence showing that deviations from the norms are still widespread and undermine the stated goals of many policies. This article aims to explore to what extent the political factor (party affiliation, i.e. local informal power networks) interferes with the allocation of public funds as far as three main areas of decentralised policy are concerned: (i) the general purpose equalisation transfers; (ii) the Roads Fund grants and (iii) the transfers for financing the pre‐university education. These components represent a relatively large share of the local budgets and are illustrative for two important attributions Romanian LGs perform today: maintaining the local infrastructure and providing essential social services. Through a set of variables—measuring, on the one hand, the real pattern of resource allocation and on the other hand, the intensity of politicisation in the three areas—we tested the hypothesis that intergovernmental financial flows in Romania are to a large extent captured by rent‐seeking groups. It turns out that this is indeed the case with the funds for infrastructure, and much less so with the transfers financing pre‐university education. Some conclusions from these contrasting situations are drawn which reflect on the broader discussion, the link between decentralisation and corruption. Copyright © 2005 John Wiley & Sons, Ltd.     

A better budget rule

Debt limits, interest coverage ratios, one‐off balanced budget requirements, pay‐as‐you‐go rules, and tax and expenditure limits are among the most important fiscal rules for constraining intertemporal transfers. There is considerable evidence that the least costly and most effective of such rules are those that focus directly on the rate of spending growth, even with their seemingly ad hoc nature and possibilities for circumvention. In this paper, we use optimal control theory and martingale methods to justify a transparent, nonarbitrary rule governing maximum sustainable rate of spending growth, treating the revenue structure of a jurisdiction as a given continuous‐time stochastic process. Our results can be used to determine whether a proposed rate of spending growth is sustainable or not. © 2009 by the Association for Public Policy Analysis and Management     

“Capacity‐building” in global Internet governance: The long‐term outcomes of “multistakeholderism”

“Capacity building” is a catch phrase from the UN development discourse. In recent years, it has entered the global Internet governance (IG) arena. At World Summit of the Information Society (WSIS 2003), “capacity building” was identified as a key public policy issue. It is proposed in this study that ‘capacity building’ be defined in a different manner – as the principal outcome of the experimental multistakeholder (MSH) process in global IG. The open and inclusive process of stakeholder deliberation leads to accumulation of intellectual capital, development of relational infrastructure for the domain (epistemic community), and emergence of common global consciousness. When cast as a capacity‐building process, MSH collaboration at global Internet governance arenas exhibits long‐term and large‐scale intangible outcomes. This study contributes to the understanding of the capacity‐building potential of MSH collaboration in IG. By employing concepts from International Relations and Organizational Learning, the author develops a model of tangible and intangible outcomes of MSH collaboration. This unique model can be used for studying the effects in other stakeholder venues of governing global resources and processes.     

Cream‐Skimming,Parking and Other Intended and Unintended Effects of High‐Powered,Performance‐Based Contracts

As performance‐based contracting in social welfare services continues to expand, concerns about potential unintended effects are also growing. We analyze the incentive effects of high‐powered, performance‐based contracts and their implications for program outcomes using panel data on Dutch cohorts of unemployed and disabled workers that were assigned to private social welfare providers in 2002 to 2005. We employ a difference‐in‐differences design that takes advantage of the fact that contracts gradually moved from partial performance‐contingent pay to full (100 percent) performance‐contingent contracting schemes. We develop explicit measures of selection into the programs and find evidence of cream skimming and other gaming activities on the part of providers, but little impact of these activities on program outcomes. Moving to a system with contract payments fully contingent on performance appears to increase job placements, but not job duration, for more readily employable workers.     

E‐participation Opportunities and the Ambiguous Role of Corruption: A Model of Municipal Responsiveness to Sociopolitical Factors

Municipalities ostensibly scale the ladder of e‐participation improvement to gain legitimacy. However, research has not yet addressed how e‐participation initiatives are affected by serious legitimacy concerns such as corruption. One municipal response to corruption is to use e‐participation offerings as a remedial effort to gain citizen trust, but window‐dressing strategies might also be used. In this article, the authors attempt to make sense of this ambiguity by hypothesizing that the effects of perceived corruption on e‐participation offerings depend on the type of e‐participation as well as the level of local social capital and local public accountability demand. Analysis of data from 104 municipal websites in South Africa between 2013 and 2017 reveals support for two moderation mechanisms: (1) a positive remedial response to corruption in the presence of strong social capital and (2) a negative avoidance response to corruption in the presence of high demand for accountability.     

Testing the School‐to‐Prison Pipeline

The School‐to‐Prison Pipeline is a social phenomenon where students become formally involved with the criminal justice system as a result of school policies that use law enforcement, rather than discipline, to address behavioral problems. A potentially important part of the School‐to‐Prison Pipeline is the use of sworn School Resource Officers (SROs), but there is little research on the causal effect of hiring these officers on school crime or arrests. Using credibly exogenous variation in the use of SROs generated by federal hiring grants specifically to place law enforcement in schools, I find evidence that law enforcement agencies learn about more crimes in schools upon receipt of a grant, and are more likely to make arrests for those crimes. This primarily affects children under the age of 15. However, I also find evidence that SROs increase school safety, and help law enforcement agencies make arrests for drug crimes occurring on and off school grounds.     

Front‐Door Difference‐in‐Differences Estimators

We develop front‐door difference‐in‐differences estimators as an extension of front‐door estimators. Under one‐sided noncompliance, an exclusion restriction, and assumptions analogous to parallel trends assumptions, this extension allows identification when the front‐door criterion does not hold. Even if the assumptions are relaxed, we show that the front‐door and front‐door difference‐in‐differences estimators may be combined to form bounds. Finally, we show that under one‐sided noncompliance, these techniques do not require the use of control units. We illustrate these points with an application to a job training study and with an application to Florida's early in‐person voting program. For the job training study, we show that these techniques can recover an experimental benchmark. For the Florida program, we find some evidence that early in‐person voting had small positive effects on turnout in 2008. This provides a counterpoint to recent claims that early voting had a negative effect on turnout in 2008.     

Shifting Boundaries between the Public and Private Sectors: Implications from the Economic Crisis

What are the differences between the public and private sectors as well as their interrelationships in light of the recent financial crisis? Has the global economic crisis fundamentally shifted the boundaries between the two sectors? This essay examines the nature and extent of the shift. The authors present an analysis of the Troubled Asset Relief Program (TARP) to highlight the massive transformations that are taking place and to introduce lessons for future policy initiatives. Between financial rescue missions and the economic stimulus program, government spending accounts for a bigger share of the nation’s economy—26 percent—than at any time since World War II. The government is financing 9 out of 10 new mortgages in the United States. If you buy a car from General Motors, you are buying from a company that is 60 percent owned by the government. If you take out a car loan or run up your credit card, the chances are good that the government is financing both your debt and that of your bank. —Edmund Andrews and David Sanger, New York Times, 2009     

Negotiating Education Reform: Teacher Evaluations and Incentives in Chile (1990–2010)

Reforms designed to improve the quality of teaching by reforming personnel practices, such as pay for performance arrangements, usually run into opposition from well‐organized teacher unions that can either block reform in the short run or undermine it over the longer term. The experience of a series of reforms that introduced collective and individual pay incentives for teachers in Chile from 1990 to 2010 provide a rare example of ongoing negotiation with the teacher union that resulted in an institutionalized structure of incentive pay for teachers as well as widespread attitudes of sustained support among teachers for performance pay. Chile offers an important example of how sustained change in incentive pay can be achieved through ongoing negotiation.     

Pension Privatization: Evolution of a Paradigm

From 1981 to 2004, a paradigm shift occurred in pension systems worldwide as more than 30 countries fully or partially replaced their state‐administered pay‐as‐you‐go pension systems with ones based on individual, private savings accounts. Yet in 2005, pension privatization abruptly stopped. After the 2008 crisis, several countries that had privatized their pension systems scaled back or even canceled individual accounts. Is the new pension paradigm dead? And if so, why? This article shows that fiscal and ideational factors caused a temporary halt to pension privatization worldwide and induced transnational pension policy networks to find new ways to respond to perceived failures. Adjustments to the new pension paradigm such as emphasizing minimum pensions and recommending that governments “nudge” rather than mandate pension savings will enable pension privatization to continue in years ahead, albeit in a revised form.     

Bridging the Gap between Evidence and Policy Makers: A Case Study of the Pew‐MacArthur Results First Initiative

Developing ways to bridge the long‐recognized gap between researchers and policy makers is increasingly important in this age of constrained public resources. As noted by recent scholarship, progress toward evidence‐informed policy making requires both improving the supply of research that is reliable, timely, and relevant to the policy process and promoting demand and support for this information among decision makers. This article presents a case study of the Pew‐MacArthur Results First Initiative, which is working in a growing number of state and local governments to build systems that bring rigorous evidence on “what works” into their budget processes and to support its use in resource allocation decisions. The initiative's experience to date is promising, although creating lasting and dynamic evidence‐based policy‐making systems requires a long‐term commitment by both researchers and policy makers.     

Economic Effects of State‐Level Tax and Expenditure Limitations

As a result of devolution, state governments have taken on greater responsibility for financing and providing public services. Increasingly, states have adopted state‐level tax and expenditure limitations (TELs) to manage the growth and size of state budgets. The adoption of TELs is supported by claims that they have a positive effect on state economies, although such claims lack empirical evidence and have been contested by several scholars. Despite the ongoing debate about validating the actual economic effects of state‐level TELs, there is a lack of empirical assessments of their effects. The empirical results of this article indicate that the presence of state‐level TELs has a negative effect on the level of employment but no effect on the state's personal income per capita. The presence of state‐level TELs has no effect on either the growth of personal income per capita or the growth of employment.     

Radical Moderation: Recapturing Power in Two‐Party Parliamentary Systems

We estimate the parameters of a reputational game of political competition using data from five two‐party parliamentary systems. We find that latent party preferences (and party reputations) persist with high probability across election periods, with one exception: parties with extreme preferences who find themselves out of power switch to moderation with higher probability than the equivalent estimated likelihood for parties in government (extreme or moderate) or for moderate parties in opposition. We find evidence for the presence of significant country‐specific differences. We subject the model to a battery of goodness‐of‐fit tests and contrast model predictions with survey and vote margin data not used for estimation. Finally, according to the estimated model parameters, Australia is less than half as likely to experience extreme policies and Australian governments can expect to win more consecutive elections in the long run as compared to their counterparts in Greece, Malta, New Zealand, and the United Kingdom.     

Exploring Social Capital: as Concept and Practice in Australian Public Health Policies and Programs

Over the past twenty years interest has grown in the concept of social capital in international and Australian public policy. We explore how social capital is understood as a concept and used in practice for guiding policy development and program delivery in South Australian public health programs. The empirical research compared policy makers’ and practitioners’ understandings of social capital and how theories about social capital and health inequality were translated into practice in three case study projects. It found that there are shifting discourses between social capital and related concepts, including community capacity building, and social inclusion/exclusion. Policy makers reported less use of the concept of social capital in favour of social inclusion/exclusion reflecting changing political and policy environments where terms come into favour and then go out of fashion. In this transition period the two terms are often used interchangeably although there are some conceptual points of difference.     

The Impact of Incentives to Recruit and Retain Teachers in “Hard‐to‐Staff” Subjects

We investigate the effects of a statewide program designed to increase the supply of teachers in designated “hard‐to‐staff” areas, such as special education, math, and science. Employing a difference‐in‐difference estimator we find that the loan forgiveness component of the program was effective, reducing mean attrition rates for middle and high school math and science teachers by 10.4 percent and 8.9 percent, respectively. We also find that the impact of loan forgiveness varied with the generosity of payments; when fully funded, the program reduced attrition of special education teachers by 12.3 percent, but did not have a statistically significant impact when funding was substantially reduced. A triple‐difference estimate indicates that a one‐time bonus program also had large effects, reducing the likelihood of teachers’ exit by as much as 32 percent in the short run. A back‐of‐the‐envelope cost‐benefit analysis suggests that both the loan forgiveness and the bonus program were cost effective.