Government subsidies to private spending on public goods

This paper examines how the size of an efficient subsidy varies with the amount of free-riding and the presence of distorting taxation. Ironically, the existence of free-riding, where some individuals make no voluntary contribution at all, reduces the size of an efficient subsidy and makes a subsidy more attractive compared to direct taxation. For the gain to be significant, the number of donors must be extremely few in number. Even when the gains from a subsidy relative to direct taxation are small, a subsidy may dominate direct taxation because it can reveal an efficient level of the public good. The analysis distinguishes between traditional public goods such as national defense, and what I call transfer public goods, where members of society care about the consumption of a particular group in society such as the poor. I generalize the Samuelson (1954) results to derive conditions for efficiency in providing transfer public goods.     

The impact of Public Distribution System on poverty in India

Assessing the poverty reduction in terms of food subsidies through Public Distribution System (PDS) is an important means by which the income transfer between poor and rich expenditure classes can be analyzed. The study intends to analyze the impact of PDS on poverty on rural and urban regions. It also makes a comparative assessment between the subsidy transfers among the poor and rich expenditure classes of households. The data for this objective are adopted from 68th round of National Sample Survey Organisation (NSSO) report on PDS and other sources of household consumption (2011–2012). The impact of PDS on poverty is measured monthly per capita consumption expenditure (MPCE) decile wise by using income transfer method for major 17 states in the NSSO report. The impact of PDS on poverty is estimated through subsidy or implicit income transfer. The results of the study for all India across the rural and urban areas showed that the impact in terms of percentage increase in real MPCE is more for the poorest expenditure class in topmost MPCE deciles for all the states.     

Organizational slack in subsidized nonprofit institutions

Informal objectives of managers next to the formal objective of the organization can be a source of organizational slack or X-inefficiency in nonprofit organizations. If the organization is subsidized the donor can restrain organizational slack by choosing an appropriate subsidy system. Four subsidy systems are discussed: output, input, revenue and lump sum subsidy. Output subsidy reduces slack most. The ranking of input subsidy compared with lump sum subsidy depends on the elasticity of demand for output. Revenue subsidy equals input subsidy. Changes in the subsidy regime for residential adult educations in the Netherlands turn out to have been inconsistent.     

Separate,Unequal, and Ignored? Interjurisdictional Competition and the Budgetary Choices of Poor and Affluent Municipalities

The fundamental value underlying the design of a fragmented system of local governance is consumer sovereignty. This system functions as a market‐like arrangement providing citizen‐consumers a choice of jurisdictions that offer different bundles of public services and taxes. However, the same choice also can facilitate class‐based population sorting, creating regions where fiscally wealthy jurisdictions coexist with impoverished ones. Some argue that the public market enhances the power of all consumers, whether poor or rich. Even if the poor are concentrated in some jurisdictions, they can exercise their voice to ensure that their government responds to their service needs. But does the voice of the poor matter as much as the voice of the rich in determining service levels in the local public market? Comparing the budgetary choices in poor and affluent municipalities, this article shows that in highly fragmented regions, some municipal services are provided the least in communities where they are needed the most.     

Crowd‐Out or Affordability? The Lifeline Expansion's Effect on Wireless Service Spending

Public subsidization of private goods often leads to crowd‐out, reducing private spending. This effect is intended for a policy such as the 2008 Lifeline phone subsidy expansion, which aimed to increase affordable access to services. I examine the effects of this policy on households’ self‐reported wireless phone service spending in the Consumer Expenditure Survey. Using state‐level variation in policy implementation and triple‐differences event study methods, I estimate that the expansion reduced households’ wireless service spending by more than 100 percent of subsidy payments. I document that the expansion led to a separate, competitive market for providers catering to low‐income households. Consequently, higher‐quality subsidized services crowded out lower‐quality unsubsidized options, saving households more than an equivalent cash transfer. This highlights how market segmentation and competition can magnify a targeted subsidy's impact.     

Financial support of children involved in special needs adoption: A policy evaluation

This article represents one of the first systematic analyses of state subsidy payments to families adopting children with special needs (children with physical and/or mental disabilities and children who are classified as hard-to-place). The analysis focuses on the monetary subsidies provided to adoptive parents of special needs children. It attempts to characterize variation in subsidy levels between counties and the impact of subsidy levels on a child's length of time until adoptive placement. The data set employed in the analysis was collected from primary sources and is one ofthe first available depositories of information on subsidy payments for special needs adoption. Results indicate that child and case characteristics explain a significant proportion of the variation in state adoption subsidy levels, but that a substantial proportion of between-county variation in subsidy levels remains unexplained. Subsidy level was not found to affect the adoption placement rate at the margin, except for children with mental disabilities. The policy implications of these results are discussed.     

THE USE OF TAX INCENTIVES FOR PUBLIC TRANSIT AS A SUBSIDY ALTERNATIVE

The objective of this paper is to propose a positive means of encouraging the use of public transit, through the creation and utilization of incentives aimed at stimulating demand. A tax incentive is proposed and examined as a form of revenue source subsidy which can be coupled with a congestion tolllgasoline tax policy to accomplish this demand stimulation, and is examined in light of the associated public policy issues. Taken into account are the typology of subsidy, the justification for subsidy, the sources of subsidy and the impact of different types of subsidy on economic factors, such as price and cost.     

The Social and Productive Impacts of Zambia's Child Grant

Accumulated evidence from dozens of cash transfer (CT) programs across the world suggests that there are few interventions that can match the range of impacts and cost‐effectiveness of a small, predictable monetary transfer to poor families in developing countries. However, individual published impact assessments typically focus on only one program and one outcome. This article presents two‐year impacts of the Zambian Government's Child Grant, an unconditional CT to families with children under age 5, across a wide range of domains including consumption, productive activity, and women and children's outcomes, making this one of the first studies to assess both protective and productive impacts of a national unconditional CT program. We show strong impacts on consumption, food security, savings, and productive activity. However, impacts in areas such as child nutritional status and schooling depend on initial conditions of the household, suggesting that cash alone is not enough to solve all constraints faced by these poor, rural households. Nevertheless, the apparent transformative effects of this program suggest that unconditional transfers in very poor settings can contribute to both protection and development outcomes.     

Edward Bell and his Zimmermann telegram memoranda

Edward Bell (1882–1924), the American diplomat who dealt with British intelligence in the matter of the Zimmermann telegram, which pushed the United States into World War I, has been unknown in all but his name. This note offers a brief biography and photograph. It prints two unpublished memoranda that Bell wrote giving his inside story of the telegram, written to explain why an author should not reveal its solution. Also appended are a memo about that solution and its disclosure to the Americans by the telegram's main British cryptanalyst and a note revealing the ignorance of the German minister in Mexico about how the telegram came to Allied knowledge.     

Hitting a moving target: income-related health insurance subsidies for the uninsured.

New government health insurance programs are likely to emphasize voluntary purchases in a market setting, with subsidies targeted at low-income populations and stress on managed care. Such programs are best structured with a guaranteed enrollment period that is as long as six months to a year. However, given that incomes change over time, errors will be made in awarding income-related subsidies for that long. These errors are assessed in simulations undertaken with longitudinal data from the Survey of Income and Program Participation. Two allocations of the subsidies, based on current income at the beginning of the enrollment period and on actual income assessed at the end, are compared for a variety of program designs. Prospective determination of subsidies is somewhat biased toward overpayment. Net overpayments amount to 5-10 percent of subsidy costs. However, prospective payment encourages participation in the subsidy program. The simulated participation rate for true eligibles is as high as 73 percent with prospective subsidies, compared to 69 percent with retrospective reconciliation. Net overpayments are slightly reduced by testing income less frequently and over longer periods.     

Evaluating and redesigning subsidy policies for home rehabilitation

A method is developed for empirically estimating the direct leveraging, indirect leveraging, and externality benefits accruing from home rehabilitation subsidy policies. The method is applied to two single-family home rehabilitation subsidy programs administered by Minneapolis from 1976 to 1980. Multivariate statistical analysis of sampled homeowners reveals that for each dollar of grant and loan received, all else equal, participants spent $1.62 and $0.345 more, respectively, of their own funds on home upkeep, all expressed as annual averages for the period. A tentative finding of indirect effects on proximate homeowners' confidence in the neighborhood and concomitant rehabilitation expenditures is also observed. These home improvements, in turn, created an additional aesthetic externality benefit.Benefit-cost analyses employing estimated parameter values are conducted. Results show that both grants and loans are net beneficial from the societal perspective. From the budgetary perspective of the public sector, the grants program was net beneficial. Loan programs involving very low interest rates, deferred payments, and/or lengthy repayment schedules typically were not. Under wide ranges of parameter values, however, subsidized loans can be devised which yield superior budgetary efficiency to grants.These findings suggest that home rehabilitation subsidy policies should be redesigned so that the mix of grants and loans for individual recipients is varied in order to enhance budgetary efficiency. The central principle is to require that recipients who can afford to do so take out loans on terms which render them more net beneficial than grants, before any grants are awarded.     

Housing vouchers in the United States,great Britain,and the Netherlands: Current issues and future perspectives

Abstract

We compare the current U.S. housing voucher program with the British housing benefit and the Dutch housing allowance programs. After presenting the theory behind income‐related housing support, which underpins both the U.S. and European systems, we compare the three programs with respect to their scope (the budgeted versus the entitlement approach), the relationship between housing support and rent levels, the poverty trap, moral hazards, and administrative problems.

The United States can learn from Great Britain and the Netherlands that a full entitlement program can best promote equity, but given the present political and economic climate, it is unlikely that Congress will adopt such a program anytime soon. Great Britain and the Netherlands can learn from the United States how to design a more efficient tenant subsidy program, one that provides incentives to find less expensive units and promotes family self‐sufficiency through enhanced job‐seeking behavior.     

Who is "62 enough"? Identifying respondents eligible for Social Security early retirement benefits in the Health and Retirement Study

Workers are not instantly eligible for Social Security retirement benefits on their 62nd birthdays, nor can they receive benefits in the month they turn 62. This note discusses how well researchers can do using data from the Health and Retirement Study (HRS) to identify respondents old enough to receive and report early Social Security retirement benefits. It shows that only some workers aged 62 at the time of an HRS interview will be "62 enough" to have received a Social Security benefit and reported it in the survey. In general, workers become eligible for a retirement benefit the month after they turn 62, and they may receive their first payment the month after that. Until recently, payments were received very early in the month, but in mid-1997 and later, the Social Security Administration (SSA) staggered benefit payments over the course of a month. Therefore, many beneficiaries will not be able to report the receipt of their first benefit payment until the third month after their birthday in more recent HRS interviews. This note describes the best approach for approximating the pool of HRS respondents who are old enough to have reported the receipt of their first retirement benefit. It then applies the procedure to an analysis by Burkhauser, Couch, and Phillips, who used the 1994 HRS data to distinguish between those who took early retirement benefits upon turning 62 and those who postponed the receipt of benefits. Because these authors did not provide for respondents who were not "62 enough" to receive a benefit at the time of the interview, they understated the proportion of respondents who took retirement benefits at age 62.     

Inefficient households and the mix of government spending

A model is presented in which individuals can vote over government subsidies to a private good and over redistributive taxation. The subsidized good is purchased and shared by couples who act noncooperatively, while possibly being altruistic towards each other. The framework allows a separation of the subsidy policy from redistributive policy. In a majority voting equilibrium the subsidy is used exclusively to correct the individuals' spending pattern. The results suggest that spending on private goods should be an important item in government expenditures when there is strong positive income bias in the political process and/or when household decisions are relatively inefficient.     

Child Care Subsidies and Employment Behavior Among Very‐Low‐Income Populations in Three States

Using merged administrative data from welfare reform evaluations in three states, we estimate the effects of child care subsidy use on the length of time it takes for a welfare applicant to move into substantial employment. Findings show that the use of a child care subsidy during an unemployed or marginally employed spell of welfare receipt is associated with between a 0.6 and 1.7 quarter (or 11% to 34%) reduction in the time to substantial employment in two of the three state samples. The positive influence of subsidy use on transitions to substantial employment is strongest for those welfare applicants with the lowest earnings who are mixing welfare and work prior to subsidy receipt.     

Redistribution tax under non-benevolent governments

I analyze redistribution policies of majority governments in one kind of representative voting system. I employ these assumptions: members gain special benefits in the majority; parties act strategically by using redistribution transfers; the member's utility function is given in a quasi-linear function; the government's objective functions are the weighted summation of utilities and I classify governments according to the weight. The four main results are: a stable majority dose not support myopic government; the stable redistribution policy of benevolent government is expressed by a scope of transfers; the stable transfer of non-benevolent governments depends on private utilities of the majority and opportunity costs of the minority; and the altruistic government is not displayed by any other majority, because it offers the total welfare of the majority to the minority as a subsidy.     

The market needs help: The disappointing record of home energy conservation

Energy conservation is widely considered to be the most promising solution to the nation's energy problems. The dominant public policy in this field has been to encourage conservation by decontrolling energy prices and relying on consumers to respond to price increases in ways that best meet their individual needs. This policy so far has led to only small reductions in energy use within the home, and even these reductions are only partly attributable to conservation behavior. Among the many obstacles to residential conservation that have come to light, a major one is the difficulty of predicting what savings will result from any specific investment in home energy efficiency. Ten years of experience after the 1973 oil crisis raises doubts about the feasibility of residential conservation as a short-term energy strategy, and suggests that new policies are needed to improve the operation of the market for conservation investment.     

The impact of the control function on the effectiveness of policy implementation

This contribution concerns a study that aims to trace factors that determine the effectiveness of policy implementation. To this end, a case study was conducted in two municipalities. In both municipalities, a random sample was drawn of 100 activities in the cultural field carried out in the year 2021. Based on this, the effectiveness of the implementation of subsidy provision was examined for both municipalities. This effectiveness has been operationalised to the percentage of correct non-applications, the percentage of rightly approved subsidy applications and the percentage of rightly rejected subsidy applications. A comparison between these municipalities, based on an analysis of the documents and 22 interviews, then provided an opportunity to explain differences in effectiveness. It turns out, that the control function provides the decisive explanation for the difference in effectiveness. This control function is not only about monitoring and controlling the implementation, but also about facilitating and optimising the process of providing subsidies. Although previous research highlights the importance of an adequate monitoring and control for implementation, the control function can be defined in a broader way. Besides overseeing proper implementation, the control function in this broader view also plays a facilitating role towards the implementers. This broader control function specifically has not often been the explicit object of implementation research. It should be noted, however, that this study is based on only two municipalities, which only examined the subsidisation of cultural activities. Therefore, no general conclusions can be drawn on this basis.     

EC Credit Assistance Programs in the Light of the US Experience: Budgetary, Financial and Political Aspects

The bulk of the subsidy cost of European Communities (EC) credit programs is not represented in the EC budget. The cost of EC loans and guarantees are not shown, and only token entries are included for the possible activation of guarantees connected to borrowing and lending. Only in the case of credit programs which entail an interest-rate subsidy, does the budget show an amount corresponding to the subsidy cost. EC budgeting and accounting methods, like those in most member states, hide the full cost of the EC credit programs. The lack of subsidy disclosure has political implications in terms of budget decision-making and control; budget authorities have neither adequate information to compare the trade-offs among the various credit assistance programs and other expenditure programs, nor to evaluate or measure the efficiency and effectiveness of credit operations. Moreover, the citizens of Europe, who are taxpayers both in their states and, to a lesser extent, in the Community, do not have a clear understanding of the costs and benefits of credit programs, either at the state or the EC level. The article refers to the US experience of federal credit reform, especially with regard to the disclosure of the cost of credit programs, as a good example of budget transparency and investigates to what extent this experience could be applied to the European Communities.     

Federal Intervention in the Municipal Bond Market: The Effectiveness of the Build America Bond Program and Its Implications on Federal and Subnational Budgeting

The American Recovery and Reinvestment Act of 2009 (ARRA) included several new federal programs intended ostensibly to “unfreeze” the credit markets as a result of the global financial crisis. One such program, the Build America Bond (BAB) program, aimed to lower the borrowing costs for state and local governments by increasing their access to capital and providing a more generous federal subsidy than the traditional indirect tax exemption subsidy. BABs are taxable bonds sold by subnational governments, which carry a 35 percent direct federal payment subsidy to the borrower. In creating this program, the federal government hoped that the large direct federal subsidy along with greater potential investor interest in taxable securities would result in lower borrowing costs for state and local governments vis‐à‐vis traditional tax‐exempt bonds. This research study examines the relative effectiveness of the BAB program and details the various quantitative and qualitative implications on federal and subnational budgeting by moving from an indirect to a direct federal subsidy approach in facilitating state and local government capital raising.