Interrelationships among public spending preferences: A micro analysis

This paper examines a system of qualitative demand equations for public spending on education, welfare, housing, health, highways, and defense. The demand for public spending for a particular category is hypothesized to be a function of income, tax-price, private benefit measures, and tastes as well as demands for other public expenditure categories. Based on individual survey data, the conditional maximum likelihood estimates of the logit equations are obtained. The results indicate the significant role of tastes, private benefit variables, and tax-prices. In addition, positive rather than negative, demand interrelationships are found to exist. These findings question the validity of the median voter hypothesis as a model for public budget allocation.     

Globalization,government spending and taxation in the OECD

Abstract. This article assesses the impact of globalization on welfare state effort in the OECD countries. Globalization is defined in terms of total trade, imports from low wage economies, foreign direct investment, and financial market integration. Welfare effort is analyzed in terms both of public spending (and separately on social service provision and income transfer programs) and taxation (effective rates of capital taxation and the ratio of capital to labor and consumption taxes). Year–to–year increases in total trade and international financial openness in the past three decades have been associated with less government spending. In contrast, integration into global markets has not been associated either with reductions in capital tax rates, or with shifts in the burden of taxation from capital to consumption and labor income. Moreover, countries with greater inflows and outflows of foreign direct investment tend to tax capital more heavily.     

Road to Ruin? A Spatial Analysis of State Highway Spending

Do states engage in infrastructure expenditure competition to attract new economic activity? Economic theory is inconclusive on the matter. States might respond to increased infrastructure spending in competitor states by increasing their own infrastructure spending. Conversely, states may decrease spending in the presence of positive spillovers from competitor states' infrastructure investment. Using spatial econometric techniques and focusing specifically on highway spending, we demonstrate that states expend less on highways when spending in neighboring states increases. We explore this possibility further by modeling state personal income growth as a function of own‐state and neighbor‐state highway spending. Our findings suggest positive spillovers influence interstate relationships for highway spending rather than race‐to‐the‐top competition for economic activity.     

Buttery Guns and Welfare Hawks: The Politics of Defense Spending in Advanced Industrial Democracies

In this article, we present a new theory that, given the economic consequences of military spending, some governments may use military spending as a means of advancing their domestic non‐military objectives. Based on evidence that governments can use military spending as welfare policy in disguise, we argue that the role of ideology in shaping military spending is more complicated than simple left‐right politics. We also present a theory that strategic elites take advantage of opportunities presented by international events, leading us to expect governments that favor more hawkish foreign policy policies to use low‐level international conflicts as opportunities for increasing military spending. Using pooled time‐series data from 19 advanced democracies in the post–World War II period, we find that government ideology, measured as welfare and international positions, interacts with the international security environment to affect defense spending.     

Loyalty for sale? Military spending and coups d’etat

Coups d’etat continue to be common around the world, often leading to changes in leaders and institutions. We examine the relationship between military spending and coups and find that (i) successful coups increase military spending by more than failed attempts, and (ii) coups are more likely when military spending as a share of GDP is relatively low. Our identification strategy deals with the problem of reverse causality between coups and military spending by exploiting the conditional independence between a coup’s outcome and the change in military spending that follows it. We interpret our results as evidence that the military may stage coups in order to increase its funding, and rule out several alternative explanations.     

Charitable giving in the German welfare state: fiscal incentives and crowding out

There are two ways that government activities influence private charitable giving: (1) government spending on the provision of public goods may cause crowding out of private charitable contributions; and (2) tax incentives may boost private charitable giving. From a sample of German income tax returns, we estimate the elasticity of charitable giving relative to tax incentives, income, and government spending. Using censored quantile regression analysis, we derive results for different points of the underlying distribution of charitable giving. Evaluating overall treasury efficiency, the tax deductibility of charitable donations fosters enough private giving to offset foregone tax revenues.     

Demographic Structure and the Political Economy of Education Subsidies

This paper investigates the politico-economic impact of a society's age structure on the extent of public funding of education. Education subsidies serve to internalize positive spillovers of human capital investment, but redistribute resources from the working old to the non-working young, thus creating a conflict of interest between the two generations. The political process is characterized by a representative democracy. In the steady state, high rates of population growth lead to oversubsidization, while low rates lead to undersubsidization, relative to a lifetime income maximizing situation. Population aging leads to higher educational subsidies in the politico-economic equilibrium. Starting from a situation of undersubsidization, this raises lifetime incomes.     

中国财政政策对居民消费需求的非对称效应——基于流动性约束视角下一个新的分析框架

政府运用财政政策扩大居民消费需求,除了需要科学抉择政策取向之外,政策力度和节奏的把握也非常关键。本文在Tagkalakis研究的基础上,首先提出了中国财政政策对居民消费非对称性效应研究的理论框架,然后建立财政政策冲击对居民消费影响的经济计量分析模型,利用1999—2009年中国省际面板数据估计了政府消费冲击、税收冲击以及预期可支配收入对居民消费的影响,并在此基础上进一步考察流动性约束在财政政策冲击对居民消费产生非对称性影响中的作用。实证结果表明财政政策冲击在好与坏两个时期之间对居民消费产生了显著的非对称性凯恩斯效应。其中在坏的时期,政府消费冲击与税收冲击对居民消费影响效应的绝对幅度相对较大。虽然国外理论界认为非对称性效应产生的原因复杂,本文认为在我国财政政策冲击对居民消费产生非对称性效应的原因中,流动性约束起到了非常重要的作用。另外,预期可支配收入因是否面临流动性约束而对不同类型消费者的消费需求影响发生方向性改变。     

Money incomes of aged and nonaged family units, 1967-84

This article provides a detailed examination of changes in the income of the aged and of other age groups from 1967 to 1984. Levels of income, income inequality, the relative importance of selected types of income, and the poverty rates of various age groups are also analyzed. The data are from the Bureau of the Census Current Population Survey and annual money income before taxes is the measure of income. The relative income gains of the aged, compared with the nonaged, in 1967-84 reversed an earlier pattern in the post-World-War-II period: From 1947 to 1967, the incomes of the nonaged rose at a faster pace than those of the aged. Differences in their income growth were greater in 1979-84 than in 1967-79. Despite the substantial difference in the rates of income growth for the aged and nonaged units in 1967-84, the relationship between age and median income was altered only slightly. In 1984, aged family units continued to have relatively low median income, especially compared with the incomes of those in middle age.     

Political institutions and income (re-)distribution: evidence from developed economies

We discuss the effect of formal political institutions (electoral systems, fiscal decentralization, presidential and parliamentary regimes) on the extent and direction of income (re-)distribution. Empirical evidence is presented for a large sample of 70 economies and a panel of 13 OECD countries between 1981 and 1998. The evidence indicates that presidential regimes are associated with a less equal distribution of disposable incomes, while electoral systems have no significant effects. Fiscal competition is associated with less income redistribution and a less equal distribution of disposable incomes, but also with a more equal primary income distribution. Our evidence also is in line with earlier empirical contributions that find a positive relationship between trade openness and equality in primary and disposable incomes, as well as the overall redistributive effort.     

The effect of recent tax changes on taxable income: Evidence from a new panel of tax returns

This paper estimates the elasticity of taxable income to the net‐of‐tax share using a panel of tax returns that follows a random sample of taxpayers from 1999 to 2005, spanning the EGTRRA 2001 and JGTRRA 2003 tax changes. Results suggest that the elasticity of taxable income to the current year's net‐of‐tax share lies between 0.3 and 0.4 overall, and that the elasticity of a broader measure of income falls between 0.1 and 0.2 overall, with substantially higher elasticities for taxpayers reporting income in excess of $500,000. © 2009 by the Association for Public Policy Analysis and Management.     

Race and residential accessibility to shopping and services

Abstract

Predominantly black, upper‐income census tracts in the 10‐county Atlanta region have lower accessibility to certain personal consumption opportunities than comparable white tracts do; black residents are more likely to have to leave their neighborhoods to eat out (other than at fast food restaurants), grocery shop, or see movies. Accessibility is calculated as a function of travel time to providers of local goods and services. Such accessibility is a desirable attribute and contributes to neighborhood quality and housing value.

We find that differences in residential accessibility to shopping and services by race are not explained by income differences, but could result from real differences in consumption patterns, though these are more likely due to demographic differences between black and white populations of comparable incomes; inaccurate information on neighborhood attributes and personal consumption preferences; or racially biased business decisions. We conclude by summarizing the policy implications of our findings.     

An Investigation of the Public Deficts and Government Spending Relationship: Evidence for Greece

This paper tests the validity of the Buchanan-Wagner hypothesis for Greece, that increases in public spending are the result of the tolerance of large deficits over the period 1961–1994. To test this hypothesis, three unit-root pretests, the Dickey-Fuller, Phillips-Perron and Kwiatkowski et al. and maximum likelihood estimation techniques of cointegrating vectors and a vector error-correction model are employed. A long-run relationship is found to exist among government spending, deficit, income,wages and adult population and the importance of short-run deviations are presented. The empirical evidence suggests that Buchanan and Wagner hypothesis, seems to find support for Greece in the long-run and the short-run. Further, productivity in the public sector is lower than in the private sector and the growth of income is not an important determinant of the increase in the relative size of public spending.     

The Gnomes of Washington: Four Myths of the 1976 IMF Crisis

The IMF settlement of December 1976 looms large in popular and partisan views of the politics of the 1970s. It is argued here that conventional academic wisdom has come to embody several misleading myths about its impact on economic policy. Evidence is presented to challenge four such myths which suggest that the IMF forced the Labour government to launch an attack on public spending, introduce cash limits to control public spending, introduce monetary targets and abandon the pursuit of full employment through demand management.
Although the language of the [IMF] negotiations reflected the arcane terms of international finance… the decisions required of the British Government were profoundly political… behind the technical financial decisions lay fundamental differences over the appropriate balance between the private and public sectors, the priority between capital accumulation and social welfare, the relative weight to be given to incentives and equality… What was at issue was the future shape of the political economy of Great Britain.¹     

Distribution of income in advanced capitalist states: political parties, labour unions, and the international economy

Abstract. Hypotheses about determinants of income inequality in advanced capitalist societies are tested with data from the World Bank for 1975–80 across virtually the complete population. The results support most of the propositions of a model that takes into account differences in partisan control of government, the organization strength of labour, and the openness of the economy to international market forces. Hypotheses derived from global models of income distribution are not supported. The major findings are (1) that labour organization has no direct effect on income inequality; (2) that strong socialist parties have a negative effect on the size of the gap between the rich and the poor but no effect on the gap between the rich and the middle class; (3) that the governmental strength of conservative parties is unrelated to the size of the gap between the rich and the poor but has a very strong positive effect on the gap between the rich and the middle class; and (4) that, regardless of partisan control of government, relatively small trade dependent economies are more egalitarian than relatively large economies which are less dependent on international trade.     

税收负担、公共品层次与私人公共品需求——以山东省面板数据为例

个人税收负担的增长会对公共品需求产生负向影响,这一结论在西方的研究中被普遍证明。本文从中国实际出发,借助经典的中位选民模型,考察了个人税收负担对公共品需求的影响。通过对山东省17市1997～2007年的面板数据进行实证分析,发现个人税收负担对公共品需求的负向影响在中国并不普遍存在。就影响公共品需求的各因素来看,公共品需求的收入弹性以及人口拥挤效应普遍存在;个人税收负担对济南、烟台两市一般公共品需求产生负向影响,对其余15个市产生正向效应。为进一步揭示税收负担对不同层次公共品需求的影响差异,选取了教育和公共安全这两类特殊公共品进行研究。山东省17地市的个人税收负担对教育这类公共品普遍产生负向影响;对公共安全类公共品产生完全正向效应。因此,本文认为山东省一般公共品市场是供给导向的市场,税收弹性与公共品需求层次相关,建议建立引导公民合理表达公共品需求意向机制。     

Staff growth in international organizations: A principal-agent problem? An empirical analysis

The analysis covers 27 international organizations in the years 1950–2001. From the first to the last year, staff increased at a compound average rate of 3.2% per annum, while the number of member states rose by only 2.5%. The pooled analysis of 817 observations (including task proxies and organization dummies) reveals that (i) the elasticity of staff to membership is much larger than unity (1.36), (ii) United Nations organizations have significantly more staff, (iii) international organizations in the United States and Switzerland have significantly less staff, (iv) heterogeneity in terms of per capita income limits the size of an international organization and that (v) its staff is larger if its membership comprises many industrial or (former) communist countries. In a reduced sample, the financing share of the largest contributor in combination with the party or programmatic orientation of its government has a significantly negative effect on staff because the size of the largest financing share determines the incentive to monitor. U.S. exit from an international organization reduces its staff significantly. Most of these results depend on the condition that the non-stationary component of staff size is not taken account of by time dummies or trends.     

Inequality,the Crash and the Ongoing Crisis

The rise in inequality across many rich nations, but especially in the United Kingdom and the United States, was meant to lead to a bigger economic pie from which all would benefit. In fact, the increased concentration of income over the last three decades has led to more fragile and unstable economies making it a key cause of the 2008 Crash and today's lack of recovery. The evidence of the last 100 years is that models of capitalism that fail to share the proceeds of growth more evenly will eventually self‐destruct. More equal societies have softer business cycles. In contrast, more unequal economies are associated with more extreme cycles—they have exaggerated booms, deeper falls and extended troughs. The scale of inequality is not just an issue about fairness and proportionality, it is therefore integral to economic health.     

THE EFFECT OF RECENT TAX CHANGES ON TAXABLE INCOME: CORRECTION AND UPDATE

This article is a Commentary on Bradley T. Heim ( 2009 ), The effect of recent tax changes on taxable income: Evidence from a new panel of tax returns,” Journal of Policy Analysis and Management, 28, 147–163. doi: 10.1002/pam.20406 . This note provides corrected estimates of the elasticity of taxable income to the net of tax share using a panel of tax returns that follows a random sample of taxpayers from 1999 to 2005, spanning the EGTRRA 2001 and JGTRRA 2003 tax changes. Two errors were corrected: the specification of income splines, and the subtraction of capital gains income from the dependent variable. Though the original results are largely robust to the first change, they are not robust to the second. The corrected estimates suggest that the elasticity of taxable income to the current year's net of tax share is small and statistically insignificantly different from zero.     

The political economy of the peace dividend

We develop a model of the peace dividend and use it to predict the fiscal consequences of a reduction in the demand for military spending. The model is based on the assumption that the political process responds to political demands and costs in a way that maximizes net political benefits. The predictions of our model on how a peace dividend will be allocated over nonmilitary spending, tax relief, and deficit reduction is tested against the experience of eight major wars in United States history.