Federal Public Investment Spending and Economic Development in Appalachiai

Abstract This analysis examines the relationship between federal public investment spending and economic development in the special case of Appalachia. We propose that the effects of federal public investment spending on economic development operate indirectly through private capital accumulation. We use a spatial lag regression model to test our ideas for the 1980s and the 1990s. In the first step, we show that average federal public investment spending from 1983–1989 and 1993–1999 has net positive effects on measures of private capital accumulation in Appalachia. In the second step, we add three indicators of county economic development in 1989/1999 and find that earnings and nonfarm employment growth during the respective decades predicts higher levels of economic development at the end of the decades. However, while federal public investment spending has positive effects on measures of private capital accumulation, it has no direct effect on measures of economic development.     

The Impact of Economic Crises on NGOs: The Case of Greece

The paper analyzes the impact of economic crises on organized civil society. A number of empirical studies have shown that a financial crisis can inflict a serious damage on the nonprofit sector—mainly through a sharp decline in revenues. However, the Greek case shows that a crisis can also have some positive effects on NGOs: many nonprofits introduced reforms that increased efficiency, the number of volunteers reached record levels, and there was a spectacular rise in funding by private philanthropic foundations. However, Greek NGOs continue to be dependent on external funding, unable to raise large sums from their members and the wider public. Organized Greek civil society continues to be turned upside down: dependency on EU and state funds is being replaced by dependency on private foundations.     

Federal Spending and Economic Growth in Appalachian Counties*

Abstract In this paper I use a model informed by key theories of regional processes, and I test three related hypotheses concerning the effects of different types of federal spending (public investment, defense, salaries/wages) on economic growth in the 399 Appalachian counties during recent business cycles. The analysis incorporates a maximum likelihood estimate spatial lag regression model and shows that federal public investment spending and defense spending exerted net positive effects on per capita income, civilian employment, and private nonfarm employment growth rates between 1983 and 1988. In addition, public investment spending had a positive relationship with percentage of earnings from mining for the 1983–1988 period. Federal spending, however, had less consistent effects during the 1989–1992 recession. Implications for theory and research on regional processes are discussed.     

Time-Series Evidence on the Nonlinearity Hypothesis for Public Spending

Barro-type endogenous growth models propose a nonmonotonic relationship between productive public spending and growth. Under this so-called nonlinearity hypothesis the size and direction of growth effects due to an increase in public spending depend on the share of public spending in GDP. Employing German time-series data we examine the validity of the nonlinearity hypothesis. We estimate growth effects by using models whose coefficients are allowed to vary with the share of public spending in GDP. Our results support the hypothesis for public consumption but not for public investment data. (JEL H54 , E62 , C22 )     

Une privatisation inédite de la norme : le cas de la politique comptable européenne

EU member states have, for a long time, been harmonizing their accounting rules in order to facilitate comparisons among countries. A new regulation in 2002 has suddenly sped up this process. Under it, companies quoted in the stock exchange are, since 2005, required to comply with the standards set by the International Accounting Standards Board (IASB), a private body without any public mandate. After trying to harmonize its members’ standards, the EU’s decision to resort to private subcontracting is even more puzzling given the Union’s lack of any statutory control over the IASB. In this impressive case of the privatization of a regulatory process, attention is focused on the incorporation of IASB standards in EU law and on the structure and governance of this board. This transfer of power is much broader than usual forms of delegation to the private sector. Although several reasons underlie this relinquishment of public authority, the primary one lies within the EU itself.     

Where do Remittances Go in Household Consumption? Empirical Evidence from Sri Lanka-Wide Micro-data

Private internal and international remittances are a major source of household money in Sri Lanka, yet their impact on household welfare has long been a research gap. Based on the Migration and Development Theory, this article examines how private remittances affect household expenditure behaviour, using nationally representative microdata and applying quasi-experimental methods. Private remittances have significantly increased household per-capita expenditure and initiated positive behavioural changes via increased allocations for basic needs, human and physical capital investment. Compared with internal remittances, the impact of international remittance shows a strong potential for reducing poverty incidence and improving people's well-being: households in richer/richest expenditure quartiles and urban households invest in education, which supports the country's long-standing record of education. Rural households demonstrate favourable changes in spending behaviour with receiving private remittances. From a public policy standpoint, government favours migration so that remittances are more likely to flow. A proper remittance-transfer mechanism to encourage smooth remittance is thus required.     

A new paradigm: the wealth effect of the stock market on consumption,in a context of interacting bio-systems

This study examines the existence of a stock market wealth effect on aggregate private consumption in the economy. A theory of investor/consumer behavior is suggested, in a context of a symbiotic relationship between two quasi-bio-systems. The model offers predictions about likely outcomes in capital market interaction with the underlying economy in general and consumption in particular. These predictions are validated empirically. Specifically, the paper finds that investors/consumers do not respond immediately to a stock market rise (fall). Rather, they wait at first and thereafter gradually accelerate their ‘wealth spending’ on consumption only after they are convinced that the gain is permanent (a variation of the ‘income smoothing’ that was suggested many years ago by Friedman (1957)). The paper suggests that the capital markets and the economy interact like two bio-systems symbiotically responding to each other. This study presents evidence that the consumption wealth spending peaks at approximately 2.5% of the stock market wealth CUMULATIVE gain in the previous 12–24-month period, with some effects lingering on up to 36 months. For example, it shows that over 40% of the growth in consumer spending in 1999 was attributable to gains in the stock market in previous years, contributing to a strong GDP in that year.     

A MACROECONOMIC ANALYSIS OF ENERGY SUBSIDIES IN A SMALL OPEN ECONOMY

We construct a dynamic model of a small open economy to analyze the effects of large energy subsidies. The model includes domestic energy production and consumption, trade in energy at world market prices, as well as private and public sector production. The model is calibrated to Egypt and used to study reforms such as reductions in energy subsidies with corresponding reductions in various tax instruments or increases in infrastructure investment. We calculate the new steady states, transition paths to the new steady state, and the size of the associated welfare losses or gains. Our main results for a 15% cut in energy subsidies are: (1) Steady state gross domestic product drops in most of our experiments as less energy is used in production. (2) Steady state consumption rises in most of our experiments. (3) Welfare can rise by as much as 0.6% in consumption equivalent terms. (4) The largest gains in terms of output and of welfare can be obtained when savings from energy subsidy cuts are used to fund additional infrastructure investment. (JEL E21, E63, H55, J26, J45)     

SPENDING WISELY? HOW RESOURCES AFFECT KNOWLEDGE PRODUCTION IN UNIVERSITIES

Every year billions of dollars are spent on research grants to produce new knowledge in universities. However, as grants may also affect other research funding, the effects of financial resources on knowledge production remain unclear. To uncover how financial resources affect knowledge production, we study the effects of research spending itself. Utilizing the legal constraints on university spending from an endowment we develop an instrumental variables approach. Our approach instruments for university research spending with time‐series variation in stock prices interacted with cross‐sectional variation in initial endowment market values for research universities in the United States. Our analysis reveals that research spending has a substantial positive effect on the number of papers produced, but not their impact. We also demonstrate that research spending effects are quite similar at private and public universities. (JEL H5, I2, O3)     

SECTORAL COMPOSITION OF GOVERNMENT SPENDING AND MACROECONOMIC (IN)STABILITY

This article examines the quantitative interrelations between sectoral composition of public spending and equilibrium (in)determinacy in a two‐sector real business cycle model with positive productive externalities in investment. When government purchases of consumption and investment goods are set as constant fractions of their respective sectoral output, we show that the public‐consumption share plays no role in the model's local dynamics, and that a sufficiently high public‐investment share can stabilize the economy against endogenous belief‐driven cyclical fluctuations. When each type of government spending is postulated as a constant proportion of the economy's total output, we find that there exists a trade‐off between public consumption versus investment expenditures to yield saddle‐path stability and equilibrium uniqueness. (JEL E32, E62, O41)     

THE IMPACT OF FINANCIAL RESTRUCTURING AND CHANGES IN CORPORATE CONTROL ON INVESTMENT AND EMPLOYMENT IN THE U.S. PETROLEUM INDUSTRY

This article investigates the effects of changes in market conditions and the financial structure of domestic petroleum firms on employment and investment in offshore oil leases. Important theoretical issues include the extent to which managerial power in firms has been challenged by intervention from financial markets and institutional investors and the effects of changes in financial control on employment and inventory investment. A pooled cross-section time series data set was assembled for forty large oil companies for 1978–1989. A dynamic analysis of company employment levels and investment in offshore oil leases in the Central Gulf of Mexico reveals that falling oil prices and lower domestic oil consumption reduced spending on offshore leases. Some support was found for the agency theory's claim that lower free cash flow reduced spending on offshore leases in the late eighties. Support was also found for an executive defense strategy (Useem 1993), where petroleum company managers reduced lease spending and employment as an adaptation to changes in market fundamentals and external threats from capital markets and institutional investors.     

Money matters: An exploratory study of the socio-cultural context of consumption, saving, and investment patterns

This study focuses on 36 professional South Asian (Indian) families in a metropolitan city in Canada in order to understand motives for financial behavior. In accordance with the Hindu world view, Indians view wealth acquisition as necessary for the natural progression of an individual's life and take a long view of time when it comes to investment decisions. Their primary purpose is to invest money in order to provide for their children's education. Their cultural roots allow them to take a long-term view and makes them more risk tolerant. Although these families take economic criteria into account, such criteria alone do not fully explain their consumption, saving, and investment patterns. It would appear that their need for saving determines their consumption, not the other way around. To understand their financial behavior, one has to identify the cultural worlds in which Indians live. The study highlights the importance of understanding the socio-cultural context of decisions that may appear to be purely economic decisions at first sight.     

TAX EFFECTS VERSUS BUDGET EFFECTS ON LABOR SUPPLY

This paper analyzes the effects on labor supply of parallel changes in taxes and public spending of various types. A number of important recent developments in the labor supply behavior of households are highlighted by such a study of various types of "budget effects," rather than isolated "tax effects." This comes out in particular when considering cross substitution effects on labor supply of changes in public spending on goods and services or of the subsidization of goods and services provided by private markets. Moreover, the income effects of tax changes are often mitigated, or possibly even removed, by the income effects of the accompanying expenditure changes.     

Impact of the EU Structural Funds on Financial Capacities of Non-profit Organizations

To fulfil their role, non-profit organizations (NPOs) need sufficient capacities. These include, first and foremost, financial capacity. EU Cohesion Policy commands financial resources of 351.8 bn. EUR. The EU is also willing to support NPOs from this source. With such considerable funding, the research questions arise: How much money have NPOs received? What are the effects of such assistance on the financial capacities of NPOs? On a sample of 2715 non-profit organizations in the Czech Republic, we have found that EU subsidies have a positive impact on financial capacities, measured as real assets. It is caused by using EU funds for investment. We have not proved an effect on short-term financial capacities measured on revenues. Moreover, the distribution of financial support among PBOs is unequal as 4% of NPOs collected 80% of subsidies due to differences in skills among NPOs’ managers.     

The impact of migrants' remittances on the Egyptian economy

"The main objective of this paper is to evaluate the impact of the large remittances made by Egyptian migrants to their home country on the Egyptian economy. In order to study this impact, we use the implications of the standard Keynesian model. We estimated the structural equations of the model using annual data for the Egyptian economy over the period from 1970 to 1984.... The results suggest that remittances have had a strong positive impact on GNP in Egypt." The authors note that remittances especially affect private consumption spending. Policy implications concerning labor migration are discussed. (SUMMARY IN FRE AND SPA)     

Investor preferences for positive social externalities and state-owned enterprises’ facilitated access to capital

State-ownership of commercial companies exists around the world, and it is important to understand its effect on financing and investment decisions. Empirically, firms that are partially state-owned (SOE) usually profit from easier access to capital. We propose a novel explanation for this: investors’ social preferences can affect capital allocation if SOEs are perceived as socially beneficial. In support of this we found that people attribute social benefits more to SOEs than to private firms, and their propensity to invest depends on this attitude. Further, in an incentivized modified stochastic public goods game, participants invested in risky options with positive externalities even when the aggregate of private return and externality was lower than the return of an investment option with only private returns. For the case of the EU, we discuss alternative explanations such as state guarantees and political lending in the light of regulations of state aid. We conclude that even if these regulations prohibit direct or indirect state aid for SOEs, state-ownership can affect capital allocation through investors’ social preferences.     

Equity in Education Expenditure in Thailand

This article analyses the distributional effects of education spending across regions of Thailand, a country that purportedly seeks to reduce regional welfare disparities through decentralisation. It finds that public expenditure on education is neither progressive nor pro‐poor, although there are sizeable regional differences, driven by the pro‐rich distributional profiles of public tertiary education spending and public transfers to private education. Policy‐wise, these results suggest that the current decentralised allocation of educational spending is not consistent with an equity‐enhancing goal.     

Welfare state and infant mortality

This article seeks to understand the effects of welfare-state spending on infant mortality rates. Infant mortality was chosen for its importance as a social indicator and its putative sensitivity to state action over a short time span. Country fixed-effects models are used to determine that public health spending does have a significant impact in lowering infant mortality rates, net of other factors, such as economic development, and that this effect is cumulative over a five-year time span. A net effect of health spending is also found, even when controlling for the level of spending in the year after which the outcome is measured (to account for spurious effects or reverse causation). State spending effects infant mortality both through social mechanisms and through medical ones. This article also shows that the impact of state spending may vary by the institutional structure of the welfare state. Finally, this study tests for structural breaks in the relationship between health spending and infant mortality and finds none over this time period.     

Healthy, educated and wealthy: A primer on the impact of public and private welfare expenditures on economic growth

In this paper, we provide first evidence of the impact of public and private expenditures in health and education on economic growth, via their influence on people's health, skills and knowledge. We consider a growth accounting framework in order to test whether countries that devote a larger amount of resources to the consumption of health and educational services experience higher growth rates. We also test whether the effects on economic growth of public expenditure in health and education differ from those of private expenditure. Our empirical analysis is based on a panel of 19 OECD countries observed between 1971 and 1998. The results are consistent with the hypothesis that health and education expenditure affects positively growth. The estimated impact is stronger for health than for education. More importantly, we find some evidence that public expenditure influences GDP growth more than private expenditure.     

Decomposing the age effect on risk tolerance

The importance of investment portfolio allocation has become more apparent since the onset of the late 2000s Great Recession. Individual willingness to take financial risks affects portfolio decisions and investment returns among other factors. Previous research found that people of different ages have dissimilar levels of risk tolerance but the effects of generation, period, and aging were confounded. Using the 1998–2007 Survey of Consumer Finances cross-sectional datasets, this study uses an analytical method to separate such effects on financial risk tolerance. Aging and period effects on financial risk tolerance were statistically significant. Implications for researchers and financial planning practitioners and educators are provided.