A POLITICAL ECONOMY THEORY OF FISCAL POLICY AND UNEMPLOYMENT

This paper presents a political economy theory of fiscal policy and unemployment. The underlying economy is one in which unemployment can arise but can be mitigated by tax cuts and increases in public production. Such policies are fiscally costly, but can be financed by issuing government debt. Policy decisions are made by a legislature consisting of representatives from different political districts. With the available policies, it is possible for the government to completely eliminate unemployment in the long run. However, with political decision making, the economy always has unemployment. Unemployment is higher when the private sector experiences negative shocks. When these shocks occur, the government employs debt‐financed fiscal stimulus plans which involve both tax cuts and public production increases. When the private sector is healthy, the government contracts debt until it reaches a floor level. Unemployment levels are weakly increasing in the economy's debt level, strictly so when the private sector experiences negative shocks. Conditional on the level of workers employed, the mix of public and private output is distorted.     

Regulating private monopolies and promoting competition

This article describes developments in the British telecommunications industry in its transition from the public to the private sector. These developments are not particular to this industry alone. The 1980s are seeing a movement away from direct government control in large organizations in the public sector and towards privatization, for reasons that are both political and economic. The experience of the telecommunications industry has both particular and general relevance.     

Organizations in the Public Sector in Hong Kong: Core Government, Quasi-Government and Private Bodies with Public Functions

Twenty-five years ago, the Hong Kong government was lauded as the model of a small, restricted government which was most suited to capitalist economic growth. Since that time, the government and the organizations which it has created have expanded to such an extent that there has been widespread concern that the public sector has grown too large. This article examines the reasons for the rapid growth in the size of the public sector, reflects on the organizational forms outside the traditional civil service that have been adopted, and analyzes the attempts that have been made to reduce the public bureaucracy by corporatizing and privatizing some of the services that it provides. Central to the argument presented is the question of whether an ideological commitment to small government or other functional and political factors have been the critical determinants of organizational change.     

Doing More with Less? Employee Reactions to Psychological Contract Breach via Target Similarity or Spillover during Public Sector Organizational Change

Many countries are facing the twin pressures of austerity and recession following the 2007–2008 global financial crisis. This paper uses the UK public sector and a major national announcement of budget cuts signalling extensive organizational cutbacks as its setting. We examine (a) whether organizational changes following the national announcement affect public sector employees' psychological contract breach, (b) whether employee reactions to psychological contract breach are consistent with the target similarity model and vary across foci, namely the organization, co‐workers and public service users, and (c) whether some of these relationships are moderated by job insecurity or public sector commitment. We collected longitudinal survey data before and after the announcement of budget cuts, using a sample of 340 employees from a range of public organizations and locations. Results largely confirm the hypotheses. Increases in organizational change predicted psychological contract breach, which in turn predicted decreases in contributions towards the organization; however, contributions towards co‐workers and public service users were unaffected, which can be explained with a target similarity, rather than a spillover, model. Furthermore, the relationship between breach and employee behaviours directed toward the public was moderated by job insecurity and public sector commitment.     

Privatization and National Development: A Case Study of Ghana

Proponents of privatization claim that privatization can enhance efficiency, reduce public sector debt and consequently improve overall economic performance. However, in many developing countries, and Africa in particular, the evidence is mixed. An exploratory study is done from the perspective of citizens’ about the impact of privatization on the Ghanaian national economy. The findings of the study suggest that: 1) the privatization program is pro rich; it benefits the economic and political elites more than it benefits the nation as a whole; 2) there is a high level of corruption associated with the privatization process; and 3) Privatization is not considered as one of the most important tools needed for national development, though the survey finds that many respondents believe that there is the need for some reforms in the public sector to promote national development. The results of the study indicate that administrative and political problems cannot be overcome simply by reducing the size of the state bureaucracy, but rather making government more accountable in meeting the needs of its people.     

Changing Public Service Organizations: Current Perspectives and Future Prospects

As governments and public service organizations across the globe engage in strategies of institutional and organizational change, it is timely to examine current developments and a future research agenda for public governance and management. The paper commences with reflections on the state of the field, based on an analysis of papers published in the British Journal of Management over the last decade. While there was some variation apparent across the set, the ‘typical’ article was found to be influenced by the discipline of organizational behaviour, set within the health‐care sector, using case‐study methods within field‐based studies, and investigating shifts in roles and relationships and the management of change. It has also in the past been UK‐centric, though the journal editorial policy and our own article call for a stronger international and comparative focus in the future. The second section of the article summarizes the articles and themes contained in this collection of papers on public service organizations. The third section explores a possible research agenda for the future, arguing for the significance of public sector research for the understanding of management more generally, and for examining the interface between private and public organizations (an increasingly common phenomenon). We suggest the need to set public services research in policy and political contexts, and suggest this may reveal organizational processes of wide interest. We call for a wider set of disciplines to engage in public management research, and to engage in moving the agenda from the study of efficiency to effectiveness as defined by a variety of stakeholders. We address the issue of how far public management researchers should become directly engaged with the world of policy and suggest that whether researchers engage in Mode 1 or Mode 2 research, their work would benefit from a stronger theoretical base.     

SOVEREIGNS VERSUS BANKS: CREDIT,CRISES, AND CONSEQUENCES

Two separate narratives have emerged in the wake of the Global Financial Crisis. One interpretation speaks of private financial excess and the key role of the banking system in leveraging and deleveraging the economy. The other emphasizes the public sector balance sheet and worries about the risks of lax fiscal policy. However, the two may interact in important and understudied ways. This paper examines the co‐evolution of public and private sector debt in advanced countries from 1870 to 2012. We find that in advanced economies financial crises are not preceded by public debt build‐ups nor are they more likely when public debt is high. However, history shows that high levels of public debt tend to exacerbate the effects of private sector deleveraging after financial crises. The economic costs of financial crises rise substantially if large private sector credit booms are unwound at times when the public sector has little capacity to pursue macroeconomic and financial stabilization.     

Political Influence and Bureaucratic Autonomy

The establishment of autonomous public bodies during the past two decades has created a highly fragmented public sector. Using a dataset with more than 200 Dutch public sector organisations, this article examines three related sets of questions: to what extent a relationship exists between formal and de facto autonomy; the level of influence that interested parties exert upon those organizations; whether a relationship exists between levels of formal and de facto autonomy and the level of influence exercised by these parties. We find that formal autonomy does not reinforce de facto autonomy; organizations with less autonomy report higher levels of political influence when policy autonomy is concerned; and that organizations with more autonomy report higher societal influence on their financial autonomy.

Long‐Term Debt and Optimal Policy in the Fiscal Theory of the Price Level

The fiscal theory says that the price level is determined by the ratio of nominal debt to the present value of real primary surpluses. I analyze long‐term debt and optimal policy in the fiscal theory. I find that the maturity structure of the debt matters. For example, it determines whether news of future deficits implies current inflation or future inflation. When long‐term debt is present, the government can trade current inflation for future inflation by debt operations; this tradeoff is not present if the government rolls over short‐term debt. The maturity structure of outstanding debt acts as a “budget constraint” determining which periods' price levels the government can affect by debt variation alone. In addition, debt policy—the expected pattern of future state‐contingent debt sales, repurchases and redemptions—matters crucially for the effects of a debt operation. I solve for optimal debt policies to minimize the variance of inflation. I find cases in which long‐term debt helps to stabilize inflation. I also find that the optimal policy produces time series that are similar to U.S. surplus and debt time series. To understand the data, I must assume that debt policy offsets the inflationary impact of cyclical surplus shocks, rather than causing price level disturbances by policy‐induced shocks. Shifting the objective from price level variance to inflation variance, the optimal policy produces much less volatile inflation at the cost of a unit root in the price level; this is consistent with the stabilization of U.S. inflation after the gold standard was abandoned.     

Changing Public Service Organizations: Current Perspectives and Future Prospects

As governments and public service organizations across the globe engage in strategies of institutional and organizational change, it is timely to examine current developments and a future research agenda for public governance and management. The paper commences with reflections on the state of the field, based on an analysis of papers published in the British Journal of Management over the last decade. While there was some variation apparent across the set, the 'typical' article was found to be influenced by the discipline of organizational behaviour, set within the health-care sector, using case-study methods within field-based studies, and investigating shifts in roles and relationships and the management of change. It has also in the past been UK-centric, though the journal editorial policy and our own article call for a stronger international and comparative focus in the future. The second section of the article summarizes the articles and themes contained in this collection of papers on public service organizations. The third section explores a possible research agenda for the future, arguing for the significance of public sector research for the understanding of management more generally, and for examining the interface between private and public organizations (an increasingly common phenomenon). We suggest the need to set public services research in policy and political contexts, and suggest this may reveal organizational processes of wide interest. We call for a wider set of disciplines to engage in public management research, and to engage in moving the agenda from the study of efficiency to effectiveness as defined by a variety of stakeholders. We address the issue of how far public management researchers should become directly engaged with the world of policy and suggest that whether researchers engage in Mode 1 or Mode 2 research, their work would benefit from a stronger theoretical base.     

Knowledge Groups: A Model for Creating Synergy Across the Public Sector

Private sector lays a strong emphasis on acquiring knowledge, because in today’s world, it is knowledge that is the primary source of sustained profitability. Public sector organizations also need to be learning organizations. However, they are constrained by a number of factors. This paper discusses different models for knowledge sharing, but finds them inadequate for the public sector. It then develops a model of Knowledge Groups that creates synergy across the public sector by formally gathering professionals from different and even competing public sector organizations for a clearly defined and mutually valued goal. The paper also identifies risks that may lead to the failure of Knowledge Groups. It concludes by presenting a case study on Energy Management and analyzes the dynamics of interaction between Group members for formulating guidelines and standards on the subject.     

Organizational learning and knowledge in public service organizations: A systematic review of the literature

This paper is a systematic review of the literature on organizational learning and knowledge with relevance to public service organizations. Organizational learning and knowledge are important to public sector organizations, which share complex external challenges with private organizations, but have different drivers and goals for knowledge. The evidence shows that the concepts of organizational learning and knowledge are under-researched in relation to the public sector and, importantly, this raises wider questions about the extent to which context is taken into consideration in terms of learning and knowledge more generally across all sectors. A dynamic model of organizational learning within and across organizational boundaries is developed that depends on four sets of factors: features of the source organization; features of the recipient organization; the characteristics of the relationship between organizations; and the environmental context. The review concludes, first, that defining 'organization' is an important element of understanding organizational learning and knowledge. Second, public organizations constitute an important, distinctive context for the study of organizational learning and knowledge. Third, there continues to be an over-reliance on the private sector as the principal source of theoretical understanding and empirical research and this is conceptually limiting for the understanding of organizational learning and knowledge. Fourth, differences as well as similarities between organizational sectors require conceptualization and research that acknowledge sector-specific aims, values and structures. Finally, it is concluded that frameworks for explaining processes of organizational learning at different levels need to be sufficiently dynamic and complex to accommodate public organizations.     

LACK OF COMMITMENT AND THE LEVEL OF DEBT

The tendency of countries to accumulate public debt has been rationalized in models of political disagreement and lack of commitment. We analyze in a benchmark model how the evolution of public debt is affected by lack of commitment per se. While commitment introduces indeterminacy in the level of debt, lack of commitment creates incentives for debt to converge to specific levels. One of the levels that debt often converges to implies no debt accumulation at all. In a simple example we prove analytically that debt converges to zero, and we analyze numerically more complex models. We also show in an imperfect credibility setting that a small deviation from full‐commitment is enough to obtain these results.     

Who is Appointed to What Position? The Politics of Appointment in Quangos of Korea

This study identifies the determinants of appointment of executives in quangos. Using data from 85 quangos in Korea over 15 years between 1993 and 2007, we investigate the degree to which various characteristics of organizational actors affect the choice of executives. Three organizational actors include presidents, sponsoring government departments, and the concerned quangos. Although results vary by executive position, the findings of the empirical analysis with multinomial probit and generalized linear mixed models support the idea that the appointment of quango executives is not the result of presidential choice but that of the interactions among the key organizational actors, with different incentives and resources, on the appointment. Compared to former bureaucrats, presidential allies are more likely to be appointed when presidents have more political support from the National Assembly and it is easier for insiders to be promoted as executives from larger and older quangos with clear legal origins.     

Uses of Management Control Tools in the Public Healthcare Sector

This study focuses on identifying the specific uses of management control tools in public organizations. This research is based on interviews with managers from 43 organizations in the healthcare sector. Data was analyzed and interpreted through the methodology proposed by Gioia et al. Organizational research methods, 16(1), 15-31, (2013). The different uses specified by managers of these organizations were compared with Henri’s work Accounting, organizations and society, 31(1), 77-103, (2006). Findings show matching elements, as well as differences in public sector specificities. This study ends with a discussion about the non-use of existing tools, the multi-uses of tools and the observable dichotomy between political and management uses.

     

Public Sector Reform in Denmark: Organizational Transformation and Evaluation

Public sector reform in Denmark has not been studied extensively, despite the country's tireless reorganization efforts and track record of trying new ideas. This article thus seeks to fill a gap in the literature. It does this by examining the reorganization of the public sector in terms of the transformation of organizations, and by assessing how successive governments have evaluated the initiatives taken with the aim of knowing whether or not reorganization has worked. The discussion shows that reorganization has been incremental and pragmatic, and that governments have rarely evaluated their reorganization efforts in any systematic way. One of the primary reasons for this has been the desire of politicians and top civil servants to have political and administrative flexibility and freedom to seize on strategic opportunities, unconstrained by the findings of detailed evaluations.     

Strategic Management in the Public Sector: Reflections on It’s Applicability to Iranian Public Organizations

Strategic management is a managerial story of private sector that has been transferred to the public sector. Many authors have challenged its applicability in public organizations. This paper discusses some important barriers to implementation of strategic management in the public sector empirically. After presenting a conceptual model, we examine several important factors that influence the failure or shortcomings of public sector strategic management. The last section of paper offers implications for theory and practice.     

Dissecting Public Sector Corruption in Bangladesh: Issues and Problems of Control

The public sector in Bangladesh is ridden with corruption of various dimensions and shades. Apart from bribery, rent-seeking and misappropriation of funds, the performance of public organizations is adversely affected by a host of other factors like excessive lobbying, delays in service provision, pilferage and larceny, irresponsible conduct of officials, bureaucratic intemperance, patronage and clientelism. The several institutional mechanisms to combat administrative malfeasance are rendered ineffective by a non-committed political leadership, a blase"d bureaucracy, weak accountability structures, and unproductive legislative labors. The public body for controlling corruption is itself associated with all sorts of malpractices and conducts its affair most unprofessionally. Despite several attempts, the constitutionally authorized ombudsman is yet to find its place in the governance framework.     

The impact of venture capital on investee companies: evidence from Spain

This paper examines the impact of venture capital investors on the financial structure of investee companies and the factors relevant to their capital structure, differentiated according to the investor’s public or private nature. This paper contributes to our understanding of the beneficial effects of such investors in response to the funding needs of SMEs and the decisions taken in this respect. The empirical analysis shows that, on average, these investee companies have a lower level of short-term debt than the average Spanish company. It is suggested that the debt structure is related to the growth opportunities presented, the business sector, the geographic location and the duration of the venture capital participation. These results, which are more significant in the case of companies receiving funds from public investors, highlight the effectiveness of the economic function of venture capital.     

Arm’s Length Bodies in Brazil: Contradictions and Challenges

Despite initial criticism, and often driven by performance contracts, arm’s length bodies (ALBs) have been expanding in Brazil within the context of state reform. The creation of ALBs is the strategy by which Brazilian governments have sought to address or evade the rigidity of public sector rules. Governments from different political orientations have adopted various types of ALBs with the aim of achieving some administrative agility and flexibility in the delivery of public services. The advances in flexibility are larger than the granting of autonomy for the new organizations, revealing persistent hierarchical relationships between the government and ALBs.