Recurrent explosive public debts and the long-run fiscal sustainability

In this paper, the dynamics of debt-to-GDP ratio is analyzed for three countries with long fiscal records: Sweden, the UK and the US. A novel procedure of testing for recurrent explosive behavior is implemented in order to identify episodes of explosive debt dynamics. The detected periods of explosive debt growth can be attributed to changes in economic, political and institutional environment which required active policy responses subsequently followed by fiscal adjustments. The results of the study indicate that the long-run sustainability found for these countries in other studies can be interpreted as the outcome of fluctuating fiscal policies, some of which were unsustainable.     

Implicit public debt thresholds: An operational proposal

Gauging the public debt-to-GDP ratio a country can sustain in the medium-run without putting fiscal sustainability at risk is a question of key relevance for policy-makers. Deviations from a safe level of debt should be watched over in order to take corrective measures. In this paper we make a proposal for an operational characterization of the “prudent debt level”. To do so, we use standard methods based on Vector Autoregressions to compute the probability that the public debt ratio exceeds a given threshold, using the Spanish case as an example. The resulting probabilities are highly and positively correlated with market risk assessment, measured by the spread with respect to the German bond. Our estimation of the “prudent debt level” is obtained as the debt-to-GDP ratio that maximizes the correlation between the probability of passing a pre-specified debt threshold and the spread. The so-obtained implicit debt threshold or “prudent debt level”, which is consistent with the medium-term debt-to-GDP ratio anchor of 60% of GDP, presents several advantages as a complement to existing DSA toolkits.     

The political budget cycles in the presence of a fiscal rule: The case of farm debt waivers in India

Farm debt waivers which are meant to be a one-time settlement of loans have become common in India. This paper finds, after controlling for variables related to farming distress, that the timing of waiver announcements by state governments between 2001-02 and 2018–19 is associated with the timing of elections. This points toward a pattern of policy manipulation that suggests election-year targeting of the largest special interest group in India, namely farming households. The debt waivers, either announced as policies by incumbent governments prior to upcoming elections or as election pledges by political parties which are fulfilled after winning elections, are unanticipated shocks to government revenue expenditure. We find that the waivers are associated with an increased revenue deficit, which is accommodated by a nearly 1/3rd cut in capital outlay to control the fiscal deficit, given the presence of a fiscal rule. Given its path dependence, lower capital expenditure also reduces the quality of government spending in subsequent years.     

The role of deficit and debt in financing growth in West Africa

Empirical literature on debt–growth nexus and deficit-growth nexus indicate that government debt and fiscal deficit could have negative effects on economic growth after a certain threshold level. However, the impacts of debt and deficit on economic growth via the financial sector have not been thoroughly explored. Thus, this study examines the effects of debt and deficit on finance–growth nexus in West African region. It employs empirical strategies that account for various economic and econometrics issues. Evidence from the study reveals that the impact of financial development on growth varies with the levels of debt and deficit. Specifically, the marginal effects of financial development on growth turn negative when debt and deficit exceed the threshold levels of 48.6% and −13.5% of GDP, respectively. The implication of this study is that the financial sector is one of the channels through which debt and deficit exert their influences on economic growth. Thus, an increase in financial development would not produce the desirable long-run economic benefits unless it is accompanied by a reduction in government debt and fiscal deficit. Based on the findings, the study makes some policy recommendations.     

Getting low educated and older people into work: The role of fiscal policy

Raising employment, in particular employment among older individuals and low educated individuals, stands high on the agenda of policy makers in many OECD countries. Increased sensitivity in recent years to rising inequality has made the challenge only larger. In this paper we evaluate alternative fiscal policy scenarios to face this challenge. We construct and use an overlapping generations model for an open economy where individuals differ not only by age, but also by innate ability and human capital. The model allows us to study effects on aggregate employment, per capita income and welfare, as well as effects for specific age and ability groups. We show that well-considered fiscal policy changes can significantly improve macroeconomic productive efficiency, without increasing intergenerational or intragenerational welfare inequality. Our results strongly prefer a reduction in the labor tax rate on older workers and on all low-wage earners, financed by an overall reduction in non-employment benefits. An alternative financing option is to raise the consumption tax rate. These results are to be seen as long-run effects for economies at potential output.     

Determinants of state long-term debt: The political market framework

Because it focuses on the moderating role of political institutions – which emphasize equilibrium policy outcomes under different institutional arrangements derived from the interaction of policy supply and demand – the political market framework provides useful insights for analyzing the determinants of state long-term debt. Thus, different types of state political institutions should affect the degree of long-term debt in terms of specific demands and supply. Despite the numerous studies that have either applied the political market approach to local governments in policy areas or have analyzed the determinants of long-term debt from only a financial management perspective, few studies have applied the political market framework to state governments. Thus, adopting a state financial management perspective and conducting a panel data analysis using state data from 1980 to 2014, this study identifies the reasons why state governments act on long-term obligations in terms of the political market framework. This study also aims to expand the application of the political market framework to state governments and to integrate determinants of state long-term indebtedness.     

Differentiation of welfare regimes: The case of Italy

The different welfare system classifications mainly address systems on the national level, while the local levels have not been considered in any great detail. The welfare reform measures adopted in some countries have led to more autonomy on the local level. Consequently, local authorities have adopted different social policies and developed diverse welfare services. This article addresses the case of Italy and shows that classifying a welfare regime by considering only the national level can lead to important local features being missed that are indeed relevant for its classification. The units of analysis are the 20 administrative regions of Italy. The results demonstrate that the Italian welfare system is far from being a homogeneous system and that the resources available on the local level have a considerable effect on the level of the welfare services provided. These results show that more attention needs to be directed at the local level.     

More than a piece of paper?: Personal education plans and ‘looked after’ children in England

This paper reports on research into personal education plans (PEPs) for ‘looked after’ children (children in care) in one large county local authority in England. PEPs were introduced by guidance from the Department for Education and Employment and Department of Health in 2000. The fieldwork for this research began two years after this guidance was published. The research findings show that although social services staff and teachers are critical of specific aspects of PEPs, they have helped to raise the profile of the educational needs of looked after children in the local authority studied. They have provided a forum for social work and education professionals to meet in the interests of particular children. Key problems relate to practical issues: ensuring social workers and teachers feel able to fulfil their expected roles in relation to the education of looked after children; making the system focus on meeting the needs of children as well as practitioners; difficulty in meeting specified timescales; more meaningful, constructive and sensitive involvement of children in the process of producing and reviewing PEPs. The broader issue, however, is about the ability to plan the education of looked after children. Additional barriers to planning were particularly apparent in residential care and specifically within secure accommodation.     

The quasi-market of employment services in Italy

This paper aims to study pros and cons of the first experiment of quasi-market in the provision of employment services in Italy: the Lombardy DUL (Dote Unica Lavoro). The program, which has inspired the 2015 national reform within the Jobs Act and lines towards the recent experience of several Anglo-Saxon countries, has revitalized the sector by providing important job opportunities to jobless workers. We find the typical problems of quasi-markets (lion’s share of private organizations; cherry picking; gaming and asymmetric information). However, different expedients were devised in the program to minimize these shortcomings. The empirical analysis suggest that such phenomena are at a physiological level. Analysis of the determinants of completing successfully the program provides non-trivial results as to, among others, the role of organizations of different ownership type and of the type of services provided. On these we base our policy advice.     

Socio-economical analysis of Italy: The case of hagiotoponym cities

This paper considers joining the economical characteristics of Italian cities with a relevant sociological aspect of the Catholic saints. More than in other countries, a high percentage of Italian cities are toponyms coming from the name of specific saints (hagiotoponym). The link with Italian religious views is distinct. The statistical analysis of the economic contributions that each hagiotoponym city provides to the Italian GDP is considered. Such an analysis is also based on the comparison with Italian data and is considered with the Theil, Gini, and Herfindahl-Hirschman indices. It is obtained that hagiotoponym cities represent a proxy of the overall Italian reality of medium-sized cities in the case of outliers removal.     

乡镇行政区划调整的政治经济学分析--以黑龙江省巴彦县乡镇撤并为个案

乡镇行政区划是地方政府组织系统的微观基础.乡镇行政区划的调整是在经济体制转型的背景下,在政府职能转变、城市化发展和交通通讯状况改善的条件下进行的;它有助于减轻财政和农民负担,推进乡镇机构改革和加快区域经济的发展.必须确立正确的指导思想和基本原则,采取切实可行的措施,有序推进乡镇行政区划调整工作.在探索乡镇行政区划体制改革创新的问题上,黑龙江省巴彦县的乡镇撤并个案值得研究.     

The optimal adjustment to mineral-supply disruptions: The case of aluminum in Taiwan

Although most primary commodities seem to be in over supply, a basic question remains: what is the impact of critical mineral-supply restrictions on the economies of mineral-importing nations? This article develops a framework that can be easily used to analyze the potential impact of a mineral-supply restrictions and to formulate an adjustment pattern of a small-size, Taiwan-type economy on a sector-by-sector basis. The model presented here generalizes I-O analysis through a linear-programming framework. An iterative solution procedure is incorporated into the model so that the results are more practical and flexible for use by policy makers. A corresponding restricted resource-allocation function is derived the LP-model solution, which allows the policy maker to readily construct an adjustment strategy.     

Sustainability of fiscal deficits, monetary policy, and inflation stabilization: The case of Turkey

There is a widespread consensus among economists that the goal of monetary policy, above all else, should be price stability. This study, by analyzing the Turkish experience in the last 15 years, emphasizes the importance of coordination of fiscal and monetary policies in achieving this aim. It is shown that, despite the rapidly changing financial environment, there are stationary long-run money-income relationships. Moreover, the growth rates of various monetary aggregates have predictive power for future movements in the consumer price index. However, as the Turkish experience made clear, in an economy where there are persistent budget deficits, these properties are not sufficient to conduct a successful monetary policy. The sustainability of fiscal policy is analyzed and rejected. Next, in a medium-term perspective, the levels of sustainable budget deficits compatible with a declining inflation path are calculated by making use of a small macroeconometric model.     

Spillover effects of taxes on government debt: a spatial panel approach

It is claimed that tax policy is neither time- nor space-independent due to cross-border tax base mobility, which induces spillovers. Specifically, fiscal shocks in one country are supposed to have an impact on fiscal policies in other countries. Different types of taxes influence economies differently. This paper addresses the question of their impact on government debt. Within a framework of spatial econometric modeling, we evaluate the impact of capital, labor and consumption taxes on public debt in 34 European countries in 2002–2011, and find strong spatial spillovers. We show that a consumption tax and, to a lesser degree, a capital tax significantly affect the sovereign debt, and that the global relations play a leading role (i.e. dominate the local ones) in shaping fiscal policy.     

The role of interactions with teachers and conflict with friends in shaping school adjustment

Fifth grade children (N = 346) identified school friends and reported on levels of conflict in relationships with these friends as well as perceived stress in relationships with teachers. Teachers and children provided ratings of problem behaviors at school, and children reported on their own perceptions of stress at school. Both less conflictual school friendships and less stressful relationships with teachers were linked with fewer feelings of stress and lower levels of problem problems at school. For the problem behaviors outcome, having more positive relationships with one set of others (teachers or friends) buffered children from experiencing negative consequences of poor relationships with the other set of individuals. The interaction effect involving friendship conflicts and stressful teacher interactions in relation to school stress was more complicated, differing for boys versus girls.     

Longitudinal trajectories of maternal parenting stress in Korean families: Children's executive function and school adjustment

A majority of mothers experience parenting stress in daily life; however high levels of maternal stress have been recognized as a risk factor for children's developmental outcomes. We examined trajectories of maternal parenting stress across childhood, and their longitudinal relations to children's executive function and school adjustment. Data were drawn from the Panel Study on Korean Children (PSKC), which included 1754 mothers across five waves measured at children ages 3, 4, 5, 6, and 7 (boys = 51%). Results of Latent Growth Curve Modeling (LGCM) revealed that, on average, maternal parenting stress decreased over time, but there were significant variabilities in the initial levels at age 3 and changes across early through middle childhood. High initial levels of stress and an increase in maternal parenting stress over time were associated with lower executive function at age 7 in planning-organizing and attention concentration. An increment in maternal parenting stress over time was related to poorer school adjustment at age 7, measured by classroom behavior, positive approach to learning, and child-peer and child-teacher relationships. These findings support cultural commonality and may contribute to the instantiation of culturally universal, early preventions and interventions to support mothers’ mental health. Efforts aimed at reducing maternal parenting stress early in development may promote better long-term developmental outcomes, including executive functioning and school adjustment of children in their first year of elementary school.     

The Changing Face of Pensions in Latin America: Design and Prospects of Individual Capitalization Pension Plans

This paper discusses the spread of individual capitalization pension plans in Latin America in the 1990s. Following the example of Chile in 1980, Argentina, Colombia, Costa Rica, Mexico and Peru have all introduced individual capitalization pension schemes in the 1990s. The paper discusses the rationale for the reforms and compares the main design features of the reformed pension systems in these countries. Lastly, the likely success of pension reform is discussed by focusing on issues of pension scheme coverage, benefit adequacy and administrative costs.