GOVERNMENT DEBT‐THRESHOLD CONTRACTS

Politicians tend to push the amount of public debt beyond socially desirable levels in order to increase their reelection chances. We develop a model that provides a new explanation for this behavior: office holders undertake debt‐financed public projects, but postpone the timing of part of the output to the next term. This makes it difficult to replace them. As a consequence, the office holders' reelection chances rise—as does public debt. As a potential remedy for this inefficiency, we allow candidates for public office to offer government debt‐threshold contracts. Such a contract contains an upper limit for government debt and the sanction that an office holder violating this limit cannot stand for reelection. We show that such competitively offered contracts contain low debt levels that limit debt financing and improve the citizens' welfare. When negative macroeconomic events occur, government debt‐threshold contracts may be violated, and the economy is stabilized. (JEL: D7, D82, H4)     

Challenges in Isolating the Effect of College Attainment and Debt Accumulation on Young Adult Self‐Concept

Prior studies have found college attendance to boost self‐esteem and mastery in young adults. Yet, college attendance itself is likely influenced by self‐esteem and mastery levels experienced in adolescence. And both are likely influenced by adolescent cognitive ability and academic achievement. Using data from the NLSY79‐YA, we illustrate the difficulties in isolating the positive effect of college on young adult self‐concept. First, we estimate adolescent self‐concept trajectories for respondents and analyze whether these trajectories are predictive of college attendance and degree attainment. Second, we assess whether the inclusion of adolescent self‐concept trajectories significantly reduces the beneficial effect of college on young adult self‐esteem and mastery. We also investigate the complex temporal relationship between adolescent characteristics, debt accumulation, and young adult self‐concept. Our findings show that the positive effects of college attainment and debt accumulation on young adult self‐concept are significantly reduced when measures of adolescent self‐concept and cognitive ability are included. These results imply that the benefit of going to college or acquiring debt may be overstated when adolescent characteristics are not taken into consideration.     

Reforming Land‐Tenure Systems in South Africa: Routes to Socio‐Economic and Agricultural Sustainability

Given the historical development of land tenure in South Africa, the aim of this article is to examine the best routes to alleviate poverty and retain sustainable agriculture in the country. First, a theoretical framework is presented that relates land tenure to sustainability, and three historical periods (pre‐colonial, colonial, and apartheid) are then considered to explain the changes in land tenure and their consequences. The progress and main limitations of post‐apartheid land reform to approach agricultural sustainability and alleviate poverty are discussed. Based on the analysis, different possibilities for future land reform are elaborated, followed by some recommendations for future land‐reform policies in South Africa.     

Debt‐Relief Effectiveness and Institution‐Building

This article provides new evidence on the effects of recent debt‐relief programmes on different macroeconomic indicators in developing countries, focusing on the Heavily Indebted Poor Countries (HIPCs). The relationship between debt relief and institutional change is also investigated to assess whether donors are moving towards ex‐post governance conditionality. Results show that debt relief is only weakly associated with subsequent improvements in economic performance but is correlated with increasing domestic debt which undermines the positive achievements in reducing external debt service. There is also evidence that donors are moving towards a more sensible allocation of debt forgiveness, rewarding countries which have better policies and institutions.     

The Prospects for Foreign Debt Sustainability in Post‐Completion‐Point Countries: Implications of the HIPC‐MDRI Framework

The Enhanced HIPC Initiative was launched in 1999 to reduce the Net Present Value (NPV) of foreign debt of the world's poorest countries to a sustainable threshold of 150% of their exports. This article applies a simple growth‐with‐debt model to 16 post‐completion‐point HIPCs to assess whether this goal will be met by 2015. Its somewhat optimistic base‐case projections suggest that participation in the current Enhanced HIPC‐MDRI initiative will only reduce the NPV of their total external debt to 176% of exports by this date. Sensitivity tests which expose these countries to adverse exogenous shocks help draw attention to policies that could ensure that they do not again accumulate unsustainable debt levels.     

Decision‐Making Fairness and Consensus Building in Multisector Community Health Alliances: A Mixed‐Methods Analysis

Given their inherently diverse composition and potentially competing interests, a foundational activity of community health alliances is establishing consensus on the vision and strategies for achieving its goals. Using an organizational justice framework, we examined whether member perceptions of fairness in alliances' decision‐making processes are associated with the perceived level of consensus among members regarding the alliance vision and strategies. We used a mixed‐methods design to examine the relationship between perceptions of fairness and consensus within fourteen multisector community health alliances. Quantitative analysis found the perceived level of consensus to be positively associated with decision‐making transparency (procedural fairness), inclusiveness (procedural fairness), and benefits relative to costs (distributive fairness). Qualitative analysis indicated that the consensus‐building process is facilitated by using formal decision‐making frameworks and engaging alliance members in decision‐making processes early. Alliance leaders may be more successful at building consensus when they recognize the need to appeal to a member's sense of procedural and distributive fairness, and, perhaps equally important, recognize when one rather than the other is called for and draw upon decision‐making processes that most clearly evoke that sense of fairness. Our findings reinforce the importance of fairness in building and sustaining capacity for improving community health.     

Public Debt Sustainability in Africa: Building Resilience and Challenges Ahead

The increased access of African countries to international capital markets has put public debt sustainability at the forefront of the continent's policy agenda. Utilising the ‘stabilising primary‐balance’ approach, this article finds that the actual primary balances exceeded those required to keep public debt at the 2007 level in about half the countries studied, and in several cases, those needed to reduce public debt‐to‐GDP to sustainable thresholds. The interest rate‐growth differential (IRGD) drove sustainability, underscoring the importance of growth and borrowing for growth‐enhancing outlays. As the IRGDs are likely to narrow over the longer term, fiscal policies will need to play a greater role.     

Aid and Fiscal Deficits: Lessons from Uganda on the Implications for Macroeconomic Management and Fiscal Sustainability

This article contributes to the ongoing debate on the macroeconomic management of large aid inflows to low‐income countries by analysing lessons drawn from Uganda, where the fiscal deficit before grants, which was largely aid‐funded, doubled to over 12% of GDP in the early 2000s. It focuses on the implications of the widening fiscal deficit for monetary policy, the real exchange rate, debt sustainability and the vulnerability of the budget to fiscal shocks, and argues that large fiscal deficits, even when funded predominantly by aid, risk undermining macroeconomic objectives and long‐run fiscal sustainability.     

TIMING IS MONEY: DOES LUMP‐SUM PAYMENT OF THE EARNED INCOME TAX CREDIT AFFECT SAVINGS AND DEBT?

Earned income tax credit (EITC) benefit income is paid out in a lump‐sum around tax time. We investigate whether savings and debt among EITC‐eligible families reflect the timing of payments. Using nationally representative, individual‐level data on self‐reported debt and savings outcomes, we search for differences in monthly behavior between EITC‐eligible and ‐ineligible households. We find evidence that credit card and unsecured debt holding among EITC‐eligible families reflects the timing of the EITC, with low debt levels at tax time relative to other months. Debt holding among ineligible families with children does not exhibit a similar pattern. We find limited evidence of intrayear patterns in savings behavior among EITC‐eligible families. (JEL D14, I38, H23)     

China's development loans and the threat of debt crisis in Kenya

The increased access of African countries to external capital markets has rekindled interest in growing external borrowing and placed debt sustainability at the forefront of the continent's policy agenda. In this article, we discuss the conceptual link between external loans and debt challenges. In this article, the analysis is cast in the context of new sources of loans triggered by Sino–African co‐operation. The article examines the main sectors targeted for financing in Kenya, how the Chinese‐funded projects have been structured, the financial models adopted to deliver on the projects, and the overall gains from such projects. Ultimately, the article examines the external debt situation in Kenya and how Chinese loans are likely to precipitate a crisis of sustainability. The analysis shows that, although the external financial support plays a critical role in addressing the gap in Kenya's infrastructure development, the loans also pose risks of debt sustainability in the longer term, Chinese loans particularly are tied and lack transparency. The emerging debt challenges point to the need for policy reforms in favour of enhancing loans transparency and the beneficial impacts. This would enhance the repayment capacity of borrowing countries.     

THE RELATIONSHIP BETWEEN DEBT LEVEL AND FISCAL SUSTAINABILITY IN ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT COUNTRIES

In this article we unify the traditional approaches to testing for fiscal sustainability considering the stock‐flow system that fiscal variables configure. Our approach encompasses previous ways of testing for sustainability. The results obtained for a group of 17 Organization for Economic Cooperation and Development (OECD) countries point to weak fiscal sustainability, as well as to the existence of cointegration between deficit and debt, confirming the relevance of the stock‐flow approach. Allowing for structural breaks and multicointegration turns out to be of critical importance to assess whether the fiscal authorities apply their policies looking for sustainability and whether, simultaneously, they try to stabilize real debt target levels. (JEL H62, E62, C22)     

What’s Wrong with the HIPC Initiative and What’s Next?

This article reviews the problems of the enhanced HIPC initiative and outlines possible steps towards a more efficient debt and poverty reduction initiative. After brief comments on the rationale for debt relief, it analyses some key issues related to the HIPC initiative’s aim to achieve debt sustainability, describes other fundamental problems of the HIPC framework, and discusses some less known but still crucial flaws of the initiative. It then proceeds with necessary improvements for an efficient debt reduction programme, possible modifications for a revised HIPC initiative, and some suggestions on how to overcome financing constraints. Apart from being in several respects unfair, the current framework is unlikely to permit a lasting exit from unsustainable debt for many HIPCs, and may lead to a decline in traditional development assistance.     

WHY DO GOVERNMENTS END UP WITH DEBT? SHORT‐RUN EFFECTS MATTER

This paper reconsiders the impact of public debt in an economy with heterogeneous households and incomplete markets to emphasize the short‐run effects of an increase in public debt. As compared to models that rest on steady‐state analysis, we show that the welfare gains of a public debt increase are substantially higher when transitional dynamics are accounted for. The additional debt issue allows for a temporary reduction in the income tax rate, which stimulates labor supply and generates an overshooting of the interest rate. The short‐run gains create a temptation to deviate toward higher levels of debt. Debt increases continue to generate welfare gains even when debt is considerably higher than its long‐run optimal level. (JEL E60, H60)     

Ethnic Self‐Identification of First‐Generation Immigrants1

This paper uses the concept of ethnic self‐identification of immigrants in a two‐dimensional framework. It acknowledges that attachments to both the country of origin and the host country are not necessarily mutually exclusive. There are three possible paths of adjustment from separation at entry, namely the transitions to assimilation, integration, and marginalization. We analyze the determinants of ethnic self‐identification in this process using samples of first‐generation male and female immigrants, and controlling for pre‐ and post‐immigration characteristics. While we find strong gender differences, a wide range of pre‐immigration characteristics like education in the country of origin are not important.     

Toward an interactional approach to sustainable community development

During the 1980s, the concept of sustainable development emerged as a popular solution to the problem of meeting the material needs of a rapidly growing population while minimizing environmental damage. Rather than pitting economic growth against environmental protection, proponents of sustainability focus on development which meets the needs of both present and future generations. This new legitimacy has prompted scholars to broaden the range of issues to which sustainability can be applied. A potentially important development along these lines has been the growing body of literature surrounding the concept of sustainable community development. In this paper, we delineate the central features of the sustainable community, assess obstacles to achieving sustainable communities, and present a conceptual framework for sustainable community development based on an interactional approach to community.     

Implementation challenges to the adaptive reuse of heritage buildings: Towards the goals of sustainable,low carbon cities

It is well acknowledged that low carbon emissions is one of the key factors contributing to sustainable urban development and effectively tackling climate change. Adaptive reuse of buildings is a form of sustainable urban regeneration, as it extends the building's life and avoids demolition waste, encourages reuses of the embodied energy and also provides significant social and economic benefits to the society. Thus, it embraces the different dimensions of sustainability. However, the debates over which sustainability factors are key, and how to address them all in practice, remain unresolved. This study begins with an intensive literature review of the factors that contribute to the goal of sustainable development in the conservation of built heritage. This is followed by in-depth interviews with practitioners who have participated in adaptive reuse projects in Hong Kong. These interviews confirm the reliability of the shortlisted sustainability factors. More importantly, this paper examines the challenges in incorporating a sustainability framework into adaptive reuse projects. The authors stress that the framework for achieving sustainable, low carbon adaptive reuse should be viewed more holistically, integrating social, economic, environmental, urban and political policies.     

Will ‘Emerging Donors’ Change the Face of International Co‐operation?

Responding to the recent upsurge of interest in ‘emerging donors’, this article argues that the DAC share of aid is likely to decline only slowly from what is a historically high level, and at least some non‐DAC donors are likely to see DAC approaches and norms as relevant. Nevertheless, low‐income countries seem likely to have a wider range of financing options. Three key risks are that: they prejudice their debt situation by borrowing on inappropriate terms; they use low‐conditionality aid to postpone necessary adjustment; and they waste resources on unproductive investments. DAC members should develop constructive dialogue with other bilateral donors based on recognition that sustainable development and poverty reduction should be the core purpose of aid.     

Do Commercial Debt‐for‐Nature Swaps Matter for Forests? A Cross‐National Test of World Polity Theory1

We present cross‐national models of forest loss from 1990–2005 that examine the impact of commercial debt‐for‐nature swaps. In doing so, we find substantial support for world polity theory that poor nations that implement these swaps tend to have lower rates of deforestation than poor nations that do not implement these swaps. We also find support for another aspect of world polity theory—poor nations with higher levels of international nongovernmental organizations have lower rates of forest loss. A number of other factors, including structural adjustment, debt service, democracy, population growth, and domestic economic activity, also predict deforestation. We conclude by discussing the findings, theoretical implications, methodological implications, policy suggestions, and possible directions for future research.     

Over‐indebtedness and microcredit in Cambodia: Moving beyond borrower‐centric frames

Over the past two decades, Cambodia has experienced an unprecedented credit boom, a growth in lending so rapid that the International Monetary Fund (IMF) referred to it as “one of the fastest financial deepening episodes by historical cross‐cultural standards” (IMF, 2016, p. 4). This deepening has been driven by the expansion of microcredit. In tandem, over‐indebtedness has increased among microcredit borrowers, and debt has become a significant political and economic concern. This article explores how over‐indebtedness is understood and explained by stakeholders across microcredit value chains. To do so, we draw on interviews with microfinance institution (MFI) executives, investors, branch managers, partners, financial literacy trainers, loan officers and borrowers in Siem Reap and Phnom Penh. We find that across the sector, dominant framings of over‐indebtedness privilege borrower‐centric explanations, while discounting the structural drivers of excessive lending and borrowing. As a consequence, current efforts to limit over‐indebtedness are unlikely to produce the kinds of solutions that are most needed to reduce the debt stress among borrowers. These arguments have implications across the Global South, particularly for contexts where microfinance is rapidly expanding.     

The EU‐Turkey‐'deal': Legal Challenges and Pitfalls

The EU‐Turkey “deal”, based on the Joint Action Plan (JAP) between the European Union (EU) and Turkey, raises fundamental questions on the range of European asylum law as well as on the scope of the safe third country concept, which has turned out to serve as a political master key to “solve” the problems of the so‐called “refugee crisis” in Europe. This article discusses the legal possibilities of the application of the concept as well as its limitations regarding the human rights orientation of European and international law, focusing on the evolvement and legal implementation of the “Merkel Plan”. The legal analysis also focusses on recent ideas to make new “deals” with third states such as Libya. It concludes with a critical but differentiated(?) acclaim of the controversial externalizing policy approach.