We construct a unifying model of tax competition that includes mobile workers, mobile residents, and mobile capital – and is therefore appropriate for the study of local government policy. Local governments are atomistic with respect to the world capital market, but are linked by commuting patterns, the cost of which is endogenously determined by congestion. Capital taxation creates fiscal externalities, which then alter decisions both about where to live and work. These fiscal externalities result from changing commuting patterns: when a jurisdiction increases its industrial capital tax rate, some workers change their work location to another jurisdiction, raising public good provision there. In this way, competition for workers affects competition for households. Commuting gives rise to “tax exporting,” with a higher capital tax in the (central) city partially borne by non-resident commuters from the suburbs, allowing the capital tax to remain optimal even when head taxes are available. We also consider taxes on labor, residents and property. Against, this backdrop, we show, consistent with the empirical literature, that even though jurisdictions are price-takers in the world capital market, they strategically react to the policies of other jurisdictions due to commuting linkages. This resolves an important inconsistency between the theoretical and empirical literature by making theoretical models of atomistic jurisdictions that are appropriate for local policy choice consistent with the empirical evidence that localities strategically interact in capital taxes.
{"title":"Tax Competition with Mobile Labor, Residents, and Capital","authors":"David R. Agrawal, W. Hoyt, John D. Wilson","doi":"10.2139/ssrn.3394617","DOIUrl":"https://doi.org/10.2139/ssrn.3394617","url":null,"abstract":"We construct a unifying model of tax competition that includes mobile workers, mobile residents, and mobile capital – and is therefore appropriate for the study of local government policy. Local governments are atomistic with respect to the world capital market, but are linked by commuting patterns, the cost of which is endogenously determined by congestion. Capital taxation creates fiscal externalities, which then alter decisions both about where to live and work. These fiscal externalities result from changing commuting patterns: when a jurisdiction increases its industrial capital tax rate, some workers change their work location to another jurisdiction, raising public good provision there. In this way, competition for workers affects competition for households. Commuting gives rise to “tax exporting,” with a higher capital tax in the (central) city partially borne by non-resident commuters from the suburbs, allowing the capital tax to remain optimal even when head taxes are available. We also consider taxes on labor, residents and property. Against, this backdrop, we show, consistent with the empirical literature, that even though jurisdictions are price-takers in the world capital market, they strategically react to the policies of other jurisdictions due to commuting linkages. This resolves an important inconsistency between the theoretical and empirical literature by making theoretical models of atomistic jurisdictions that are appropriate for local policy choice consistent with the empirical evidence that localities strategically interact in capital taxes.","PeriodicalId":221919,"journal":{"name":"ERN: National","volume":"35 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-05-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115273045","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The New Cooperative Medical Scheme (NCMS) was launched in rural China in 2003, aiming to safeguard rural households against catastrophic medical expenditure. The implementation of the programme has been surrounded by the concern for the potential uncontrollable growth in medical expenditure due to moral hazard. Direct evidence on the relationship between the NCMS and total medical expenditure is still scant. Using a panel data set, the Rural Fixed-point Survey (RFPS) 2003–2006 and a supplementary NCMS survey conducted in 2007, we find that joining the NCMS does not affect household medical expenditure.
{"title":"New Cooperative Medical Scheme and Medical Expenditure in Rural China","authors":"Li Li","doi":"10.1111/1468-0106.12228","DOIUrl":"https://doi.org/10.1111/1468-0106.12228","url":null,"abstract":"The New Cooperative Medical Scheme (NCMS) was launched in rural China in 2003, aiming to safeguard rural households against catastrophic medical expenditure. The implementation of the programme has been surrounded by the concern for the potential uncontrollable growth in medical expenditure due to moral hazard. Direct evidence on the relationship between the NCMS and total medical expenditure is still scant. Using a panel data set, the Rural Fixed-point Survey (RFPS) 2003–2006 and a supplementary NCMS survey conducted in 2007, we find that joining the NCMS does not affect household medical expenditure.","PeriodicalId":221919,"journal":{"name":"ERN: National","volume":"26 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125887752","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We examine the impact of population aging on municipal access to credit. A one standard deviation increase in a state’s population age leads to a 23 basis point increase in municipal bond issue spread. Three mechanisms drive this effect: income tax revenue, healthcare liabilities, and pension underfunding. Constitutional pension protections and securities with lower credit quality or longer maturity exacerbate the effect. To control for endogenous migration and mortality patterns, we exploit variation from historical state fertility trends. Our findings highlight the challenges municipalities face to cope with systemic demographic transition.
{"title":"Aging and Public Financing Costs: Evidence from U.S. Municipal Bond Markets","authors":"Alexander W. Butler, Hanyi Yi","doi":"10.2139/ssrn.3301648","DOIUrl":"https://doi.org/10.2139/ssrn.3301648","url":null,"abstract":"We examine the impact of population aging on municipal access to credit. A one standard deviation increase in a state’s population age leads to a 23 basis point increase in municipal bond issue spread. Three mechanisms drive this effect: income tax revenue, healthcare liabilities, and pension underfunding. Constitutional pension protections and securities with lower credit quality or longer maturity exacerbate the effect. To control for endogenous migration and mortality patterns, we exploit variation from historical state fertility trends. Our findings highlight the challenges municipalities face to cope with systemic demographic transition.","PeriodicalId":221919,"journal":{"name":"ERN: National","volume":"36 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-01-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126008883","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
R. Gordon, Marisa K Crowder, Laura Davidson, C. Domitrovich
School districts across the United States are developing systemic, district-wide approaches to support students’ social and emotional learning (SEL), due to the increasingly recognized role that students’ social-emotional competencies (SECs) play in their academic success (Domitrovich et al., 2017; Kendziora & Osher, 2016; Mahoney et al., 2017). Such initiatives have increased the need for cost-effective measures of students’ SECs that are feasible for large-scale use, embedded in scholarly literature, and aligned to local needs (Stecher & Hamilton, 2014). This brief describes evidence for one such measure, the Social-Emotional Competency Assessment (SECA), which is a self-report assessment of students’ SECs that can be used from late elementary to high school (Crowder et al., 2018; Davidson et al., 2018; Schamberg et al., 2017). The measure was developed in the context of a researcher-practitioner partnership that provided the opportunity to align the measure not only with theory and literature about core SECs – and the widely-used Collaborative for Academic Social and Emotional Learning five broad domains (CASEL 5; Weissberg et al., 2015) – but also the school district’s SEL standards. This brief shows how such alignment informs us about how well the measure operates and also offers insights into the standards and underlying theory and practice (see Crowder et al., 2018 for the full paper on which this brief is based).
由于越来越多的人认识到学生的社会情感能力(SECs)在学业成功中的作用，美国各地的学区正在开发系统的、全区的方法来支持学生的社会和情感学习(SEL) (Domitrovich et al.， 2017;Kendziora & Osher, 2016;Mahoney et al.， 2017)。这些举措增加了对具有成本效益的学生安全措施的需求，这些措施可以大规模使用，嵌入学术文献，并与当地需求保持一致(Stecher & Hamilton, 2014)。本文简要描述了一种这样的测量方法的证据，即社会情感能力评估(SECA)，这是一种对学生的社会情感能力的自我报告评估，可以从小学后期到高中使用(Crowder等人，2018;Davidson等人，2018;Schamberg et al.， 2017)。该措施是在研究人员与从业人员合作的背景下开发的，该伙伴关系不仅提供了将该措施与核心sec的理论和文献以及广泛使用的学术社会和情感学习协作五大领域(CASEL 5;Weissberg et al.， 2015)，以及学区的SEL标准。本摘要展示了这种一致性如何告诉我们测量的运行情况，并提供了对标准和潜在理论和实践的见解(参见Crowder等人，2018年的本摘要所基于的完整论文)。
{"title":"Linking Social and Emotional Learning Standards to the Social Emotional Competency Assessment (SECA)","authors":"R. Gordon, Marisa K Crowder, Laura Davidson, C. Domitrovich","doi":"10.2139/ssrn.3890967","DOIUrl":"https://doi.org/10.2139/ssrn.3890967","url":null,"abstract":"School districts across the United States are developing systemic, district-wide approaches to support students’ social and emotional learning (SEL), due to the increasingly recognized role that students’ social-emotional competencies (SECs) play in their academic success (Domitrovich et al., 2017; Kendziora & Osher, 2016; Mahoney et al., 2017). Such initiatives have increased the need for cost-effective measures of students’ SECs that are feasible for large-scale use, embedded in scholarly literature, and aligned to local needs (Stecher & Hamilton, 2014). This brief describes evidence for one such measure, the Social-Emotional Competency Assessment (SECA), which is a self-report assessment of students’ SECs that can be used from late elementary to high school (Crowder et al., 2018; Davidson et al., 2018; Schamberg et al., 2017). The measure was developed in the context of a researcher-practitioner partnership that provided the opportunity to align the measure not only with theory and literature about core SECs – and the widely-used Collaborative for Academic Social and Emotional Learning five broad domains (CASEL 5; Weissberg et al., 2015) – but also the school district’s SEL standards. This brief shows how such alignment informs us about how well the measure operates and also offers insights into the standards and underlying theory and practice (see Crowder et al., 2018 for the full paper on which this brief is based).","PeriodicalId":221919,"journal":{"name":"ERN: National","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-01-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116947549","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In the present report, after reviewing the allocation formulas of earmarked and block grants for decentralized institutions, five major problems of the system are identified: • Underfunding of local governments in Macedonia (subsection 3.1). Shares of local revenues in terms of GDP are low compared to other Europeans countries, even those who like Slovenia did not entrust to municipalities the responsibility for paying teacher salaries. • Decentralization is institutional, not functional (subsection 3.2). Back in 2005, Macedonia transferred to municipalities a large selection of public institutions, but the laws, and the financing instruments, indicate that the functions were not in fact transferred. • Ineffective central control over employment levels (subsection 3.3). Macedonia maintains a strict and costly system of control over local employment, even in cases when an existing employee retires. The system hampers proper functioning of some of the decentralized institutions but allows employment expansion in other sectors. • Very low local financial involvement in the financing of decentralized sectors (subsection 3.4). Most decentralized institutions, even preschools, are financed almost exclusively from grants from the national budget, with very little local contribution from own revenues. They are not seen as own institutions by most municipalities. • Debts related to obligatory transport of students of secondary schools (subsection 3.5). For too long has Macedonia accepted without any intervention growing problem of blocked accounts of many secondary schools. Three general scenarios, described in section 4, are proposed to address the identified problems and to reform the system of earmarked and block grants in Republic of Macedonia: 1. Continuation of institutional decentralization. 2. Introduction of sectoral decentralization. 3. Granting municipalities financial autonomy. Nine specific recommendations are proposed (section 4) to implement these three scenarios:
1. VAT grant Macedonian municipalities are relatively underfinanced in comparison to local governments in EU and in the Balkan region. For this reason, Macedonia needs a stronger equalization system. It is recommended (as part of the first scenario) that VAT grant is increased substantially, and that the increase be allocated as an equalization grant. A formula for this new equalization part of VAT grant is proposed in subsection 4.1. 2. Earmarked grant in primary education Since 2012, only one municipality remains in the first phase of decentralization and receives earmarked grant for primary education (Plasnica). This is a clear anomaly, because it is the only instance of a Macedonian municipality still functioning within phase I of decentralization, 13 years after the start of the process. It is recommended (as part of the second scenario) that this anomaly be corrected, and that the earmarked grant should be discontinued from Janua
{"title":"Earmarked and Block Grants in Macedonia: Options for Reform","authors":"J. Herczyński","doi":"10.2139/ssrn.3403667","DOIUrl":"https://doi.org/10.2139/ssrn.3403667","url":null,"abstract":"In the present report, after reviewing the allocation formulas of earmarked and block grants for decentralized institutions, five major problems of the system are identified:<br>• Underfunding of local governments in Macedonia (subsection 3.1). Shares of local revenues in terms of GDP are low compared to other Europeans countries, even those who like Slovenia did not entrust to municipalities the responsibility for paying teacher salaries.<br>• Decentralization is institutional, not functional (subsection 3.2). Back in 2005, Macedonia transferred to municipalities a large selection of public institutions, but the laws, and the financing instruments, indicate that the functions were not in fact transferred.<br>• Ineffective central control over employment levels (subsection 3.3). Macedonia maintains a strict and costly system of control over local employment, even in cases when an existing employee retires. The system hampers proper functioning of some of the decentralized institutions but allows employment expansion in other sectors.<br>• Very low local financial involvement in the financing of decentralized sectors (subsection 3.4). Most decentralized institutions, even preschools, are financed almost exclusively from grants from the national budget, with very little local contribution from own revenues. They are not seen as own institutions by most municipalities.<br>• Debts related to obligatory transport of students of secondary schools (subsection 3.5). For too long has Macedonia accepted without any intervention growing problem of blocked accounts of many secondary schools.<br>Three general scenarios, described in section 4, are proposed to address the identified problems and to reform the system of earmarked and block grants in Republic of Macedonia:<br>1. Continuation of institutional decentralization.<br>2. Introduction of sectoral decentralization.<br>3. Granting municipalities financial autonomy.<br>Nine specific recommendations are proposed (section 4) to implement these three scenarios:<br><br>1. VAT grant<br>Macedonian municipalities are relatively underfinanced in comparison to local governments in EU and in the Balkan region. For this reason, Macedonia needs a stronger equalization system. It is recommended (as part of the first scenario) that VAT grant is increased substantially, and that the increase be allocated as an equalization grant. A formula for this new equalization part of VAT grant is proposed in subsection 4.1.<br>2. Earmarked grant in primary education<br>Since 2012, only one municipality remains in the first phase of decentralization and receives earmarked grant for primary education (Plasnica). This is a clear anomaly, because it is the only instance of a Macedonian municipality still functioning within phase I of decentralization, 13 years after the start of the process. It is recommended (as part of the second scenario) that this anomaly be corrected, and that the earmarked grant should be discontinued from Janua","PeriodicalId":221919,"journal":{"name":"ERN: National","volume":"262 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121896976","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Local government finance, especially the systems of grants from the national to local budgets, and other revenues streams of municipalities, counties, and regions, are highly specific for each country, as they depend crucially on legislation in force, on recent history, on the political process that takes place between different levels of governance. The five case studies presented in the report identify some of these country-specific characteristics of financing of local governments, tailored to the different needs and serving different allocation of managerial and expenditure responsibilities. None of the reviewed systems can be transposed, in toto or in part, to Republic of Macedonia without a thorough review of required adaptations. At the same time, however, they provide some lessons which may be usefully considered by Macedonian reformers.
• The functioning of most European systems of local government finance is based on high degree of trust in local governments and in other users of public money. This trust, however, does not stop them from using are strict mechanisms of monitoring and control of local public finances. Any reforms considered for Macedonia should always include monitoring mechanisms, as well as procedures to intervene if lower levels of government do not follow prescribed rules.
• Some successful European countries have maintained, similarly to Macedonia, high dependence of municipalities on grants received from the national budget, with relatively reduced revenue from taxes and other sources. This indicates that efficiency of local provision of services is related not only to autonomy in generating local revenues, but also to allocation mechanisms and to effective monitoring. The efficiency and transparency of the Macedonian system may be improved even if grants remain the main revenue of municipalities.
• Every European system of local government finance uses a robust, formula-driven equalization mechanism. These systems attempt to ensure that citizens living in all municipalities may have access to services of the same high quality. In Macedonian conditions the need for strong equalization system is even more apparent than in wealthy countries of the European Union, due to large differences between municipalities. Prior to any reforms of the Macedonian equalization system, reformers should undertake an in-depth review of its strengths and weaknesses. Experience of Sweden suggests that it is better to begin with relatively simple equalization system, so that its formulas and its effects on municipalities are easy to understand and analyze.
• Taxes are an important source of revenues of European municipalities. Specific tax regime is decided differently in every country, it may include taxes on property or income. In every case, however, citizens of municipalities know that their taxes contribute to the operations of their local government, and demand accountability. This link becomes even st
{"title":"Five European Systems of Local Government Finance","authors":"J. Herczyński","doi":"10.2139/ssrn.3382179","DOIUrl":"https://doi.org/10.2139/ssrn.3382179","url":null,"abstract":"Local government finance, especially the systems of grants from the national to local budgets, and other revenues streams of municipalities, counties, and regions, are highly specific for each country, as they depend crucially on legislation in force, on recent history, on the political process that takes place between different levels of governance. The five case studies presented in the report identify some of these country-specific characteristics of financing of local governments, tailored to the different needs and serving different allocation of managerial and expenditure responsibilities. None of the reviewed systems can be transposed, in toto or in part, to Republic of Macedonia without a thorough review of required adaptations. At the same time, however, they provide some lessons which may be usefully considered by Macedonian reformers.<br><br>• The functioning of most European systems of local government finance is based on high degree of trust in local governments and in other users of public money. This trust, however, does not stop them from using are strict mechanisms of monitoring and control of local public finances. Any reforms considered for Macedonia should always include monitoring mechanisms, as well as procedures to intervene if lower levels of government do not follow prescribed rules.<br> <br>• Some successful European countries have maintained, similarly to Macedonia, high dependence of municipalities on grants received from the national budget, with relatively reduced revenue from taxes and other sources. This indicates that efficiency of local provision of services is related not only to autonomy in generating local revenues, but also to allocation mechanisms and to effective monitoring. The efficiency and transparency of the Macedonian system may be improved even if grants remain the main revenue of municipalities. <br><br>• Every European system of local government finance uses a robust, formula-driven equalization mechanism. These systems attempt to ensure that citizens living in all municipalities may have access to services of the same high quality. In Macedonian conditions the need for strong equalization system is even more apparent than in wealthy countries of the European Union, due to large differences between municipalities. Prior to any reforms of the Macedonian equalization system, reformers should undertake an in-depth review of its strengths and weaknesses. Experience of Sweden suggests that it is better to begin with relatively simple equalization system, so that its formulas and its effects on municipalities are easy to understand and analyze. <br><br>• Taxes are an important source of revenues of European municipalities. Specific tax regime is decided differently in every country, it may include taxes on property or income. In every case, however, citizens of municipalities know that their taxes contribute to the operations of their local government, and demand accountability. This link becomes even st","PeriodicalId":221919,"journal":{"name":"ERN: National","volume":"34 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-12-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128727953","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2018-11-20DOI: 10.11575/SPPP.V11I0.52965
Trevor Tombe
Alberta’s short-term fiscal challenges are well known, but its long-term ones are more significant. An aging population, a high reliance on non-renewable resource revenue, and rising debt levels will increasingly widen the current gap between spending and revenue. This paper estimates how large this gap is and where it is headed in the coming decades. Combining detailed data and projections for macroeconomic and demographic variables with a rich model of Alberta’s budget, this report quantifies the scale of the province’s fiscal challenge and explores potential ways to address it. Overall, I find the present value of the difference between spending and non-resource revenues is 4.2 per cent of GDP between 2018 and 2100. By 2040, the fiscal gap that year will be roughly 44 per cent of controllable government revenue, 29 per cent of program spending, and the equivalent of over 4 per cent of GDP. In present value terms, the fiscal gap between now and 2040 is equivalent to over $250 billion today. I further find that debt levels are not on a sustainable path, as the long-run debt obligations exceed the government’s future ability to service that debt without significant policy changes. Meaningful action on both spending and revenue can address the province’s financial challenges. I explore various potential options. Without sustained, disciplined, and transparent action today, Alberta faces a precarious fiscal future.
{"title":"Alberta's Long-Term Fiscal Future","authors":"Trevor Tombe","doi":"10.11575/SPPP.V11I0.52965","DOIUrl":"https://doi.org/10.11575/SPPP.V11I0.52965","url":null,"abstract":"Alberta’s short-term fiscal challenges are well known, but its long-term ones are more significant. An aging population, a high reliance on non-renewable resource revenue, and rising debt levels will increasingly widen the current gap between spending and revenue. This paper estimates how large this gap is and where it is headed in the coming decades. Combining detailed data and projections for macroeconomic and demographic variables with a rich model of Alberta’s budget, this report quantifies the scale of the province’s fiscal challenge and explores potential ways to address it. Overall, I find the present value of the difference between spending and non-resource revenues is 4.2 per cent of GDP between 2018 and 2100. By 2040, the fiscal gap that year will be roughly 44 per cent of controllable government revenue, 29 per cent of program spending, and the equivalent of over 4 per cent of GDP. In present value terms, the fiscal gap between now and 2040 is equivalent to over $250 billion today. I further find that debt levels are not on a sustainable path, as the long-run debt obligations exceed the government’s future ability to service that debt without significant policy changes. Meaningful action on both spending and revenue can address the province’s financial challenges. I explore various potential options. Without sustained, disciplined, and transparent action today, Alberta faces a precarious fiscal future.","PeriodicalId":221919,"journal":{"name":"ERN: National","volume":"169 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-11-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122435782","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
On September 7, 2017, Amazon, Inc., announced that it would open a second headquarters by building “HQ2,” a new office equal in size to its Seattle campus, that would involve $5 billion in local business investments over 15–17 years and would eventually employ 50,000 workers with an average compensation more than $100,000. Amazon requested that interested cities submit proposals making the case for why their community would be the best fit for this massive new endeavor, including information on the public subsidies the city and state governments would offer to sweeten the deal. Amazon’s six-week deadline created a mad scramble among the 238 North American cities that eventually submitted bids, each attempting to illustrate why it in particular would be the best location to host Amazon’s new headquarters.
Despite arguments from economic development officials justifying such subsidies, both economic theory and experience suggest that cities and states are throwing their money away when they court Amazon’s favor through subsidies. Even subsidies worth billions of dollars are unlikely to sway Amazon’s decision. Worse, these kinds of targeted economic development incentives fail to produce economic growth.
In this paper, we examine the publicly known subsidies offered to Amazon as enticements to locate its second headquarters. We show that these subsidies are unlikely to alter the location decision of the company or lead to economic growth for the communities that offer them. We illustrate the tradeoffs that these subsidies would require in terms of forgone tax cuts and alternative uses of these funds for public services, such as safety and education. Lastly, we offer examples of institutional reforms — constitutional gift clauses, direct democracy, and interstate compacts — that could reduce the number of corporate subsidies in the future.
{"title":"With Amazon HQ2, the Losers Are the Winners: Why Economic Development Subsidies Hurt More than They Help","authors":"Michael D. Farren, Anne Philpot","doi":"10.2139/ssrn.3536640","DOIUrl":"https://doi.org/10.2139/ssrn.3536640","url":null,"abstract":"On September 7, 2017, Amazon, Inc., announced that it would open a second headquarters by building “HQ2,” a new office equal in size to its Seattle campus, that would involve $5 billion in local business investments over 15–17 years and would eventually employ 50,000 workers with an average compensation more than $100,000. Amazon requested that interested cities submit proposals making the case for why their community would be the best fit for this massive new endeavor, including information on the public subsidies the city and state governments would offer to sweeten the deal. Amazon’s six-week deadline created a mad scramble among the 238 North American cities that eventually submitted bids, each attempting to illustrate why it in particular would be the best location to host Amazon’s new headquarters.<br><br>Despite arguments from economic development officials justifying such subsidies, both economic theory and experience suggest that cities and states are throwing their money away when they court Amazon’s favor through subsidies. Even subsidies worth billions of dollars are unlikely to sway Amazon’s decision. Worse, these kinds of targeted economic development incentives fail to produce economic growth.<br><br>In this paper, we examine the publicly known subsidies offered to Amazon as enticements to locate its second headquarters. We show that these subsidies are unlikely to alter the location decision of the company or lead to economic growth for the communities that offer them. We illustrate the tradeoffs that these subsidies would require in terms of forgone tax cuts and alternative uses of these funds for public services, such as safety and education. Lastly, we offer examples of institutional reforms — constitutional gift clauses, direct democracy, and interstate compacts — that could reduce the number of corporate subsidies in the future.","PeriodicalId":221919,"journal":{"name":"ERN: National","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-11-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123940950","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In nearly all larger Canadian municipalities, obscure financial reports – notably, inconsistent presentations of key numbers in budgets and end-of-year financial statements – hamper councillors, ratepayers and voters who seek to hold their municipal governments to account. Simple information, such as how much the municipality plans to spend this year or how its spending plan this year compares with the previous year’s, is hard or impossible for a non-expert citizen or councillor to find. The differences between how the numbers appear in budgets and in financial results have real-world consequences. For example, by presenting net, rather than gross, budget figures, municipalities exclude key services such as water and the fees that fund them, obscuring key activities and understating both their revenue and expense. By using cash, rather than accrual, accounting, they exaggerate infrastructure investment costs, hide the cost of pension obligations, and make it hard to match the costs and benefits of their activities. Moreover, many municipalities approve their budgets after significant money has already been committed or spent in the fiscal year, fail to publish their fiscal year-end financial results in a timely way and bury key numbers deep in their documents. This report card grades the financial presentations of major Canadian municipalities in their most recent budgets and financial statements. Of those we assessed, Toronto, Durham Region, Kitchener, Quebec City, Longueuil and Montreal failed, providing little information in reader-friendly form. More happily, Surrey garners an A+ for clarity and completeness of its financial presentation, York Region is a close second with an A, while Vancouver and Markham are also good performers. We have two key recommendations. First, municipal governments should present their annual budgets on the same accounting basis as their year-end financial statements. Their budgets should use accrual accounting, recording revenues and expenses as the relevant activities occur. For their part, provincial governments that impede the use of accrual-based budgets – by mandating that cities present separate operating and capital budgets, for example – should stop doing so. Indeed, provinces should mandate cities to present accrual budgets so the fiscal pictures of municipalities and the province use the same transparent standard. Even in cases where a province is an impediment, municipalities could release the relevant information on their own – and they should. Second, budgets, like financial statements, should show city-wide consolidated, gross revenue and spending figures that represent the city’s full claim on its citizens’ resources and the full scope of its activities. These changes would help raise the financial management of Canada’s municipalities to a level more commensurate with their importance in Canadians’ lives.
{"title":"Show Us the Numbers: Grading the Financial Reports of Canada’s Municipalities","authors":"W. Robson, Farah Omran","doi":"10.2139/SSRN.3283947","DOIUrl":"https://doi.org/10.2139/SSRN.3283947","url":null,"abstract":"In nearly all larger Canadian municipalities, obscure financial reports – notably, inconsistent presentations of key numbers in budgets and end-of-year financial statements – hamper councillors, ratepayers and voters who seek to hold their municipal governments to account. Simple information, such as how much the municipality plans to spend this year or how its spending plan this year compares with the previous year’s, is hard or impossible for a non-expert citizen or councillor to find. The differences between how the numbers appear in budgets and in financial results have real-world consequences. For example, by presenting net, rather than gross, budget figures, municipalities exclude key services such as water and the fees that fund them, obscuring key activities and understating both their revenue and expense. By using cash, rather than accrual, accounting, they exaggerate infrastructure investment costs, hide the cost of pension obligations, and make it hard to match the costs and benefits of their activities. Moreover, many municipalities approve their budgets after significant money has already been committed or spent in the fiscal year, fail to publish their fiscal year-end financial results in a timely way and bury key numbers deep in their documents. This report card grades the financial presentations of major Canadian municipalities in their most recent budgets and financial statements. Of those we assessed, Toronto, Durham Region, Kitchener, Quebec City, Longueuil and Montreal failed, providing little information in reader-friendly form. More happily, Surrey garners an A+ for clarity and completeness of its financial presentation, York Region is a close second with an A, while Vancouver and Markham are also good performers. We have two key recommendations. First, municipal governments should present their annual budgets on the same accounting basis as their year-end financial statements. Their budgets should use accrual accounting, recording revenues and expenses as the relevant activities occur. For their part, provincial governments that impede the use of accrual-based budgets – by mandating that cities present separate operating and capital budgets, for example – should stop doing so. Indeed, provinces should mandate cities to present accrual budgets so the fiscal pictures of municipalities and the province use the same transparent standard. Even in cases where a province is an impediment, municipalities could release the relevant information on their own – and they should. Second, budgets, like financial statements, should show city-wide consolidated, gross revenue and spending figures that represent the city’s full claim on its citizens’ resources and the full scope of its activities. These changes would help raise the financial management of Canada’s municipalities to a level more commensurate with their importance in Canadians’ lives.","PeriodicalId":221919,"journal":{"name":"ERN: National","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-11-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128442834","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this study we argue that the U.S. should follow the Swiss precedent, restoring a strong fiscal federalist system, with fiscal autonomy for state and local governments. A ‘no-bailout’ principle should be restored, such that state as well as local governments are subject to bankruptcy laws. Like their Swiss counterparts, state and local governments would then have an incentive to enact effective fiscal rules, mandating a balanced budget and reduction in unsustainable levels of debt. Swiss style fiscal rules are proposed for the federal government as well as state and local governments. With these fiscal rules in place elected officials would have an incentive to address the debt crisis. With effective fiscal rules, and enforcement of a ‘no-bailout principle, citizens would gain confidence in the ability of elected officials to pursue prudent fiscal policies. However, after a half century of declining dynamic credence capital, enacting the institutional reforms required for effective fiscal rules in the U.S. will be a formidable challenge.
{"title":"Fiscal Federalism and Dynamic Credence Capital in the U.S.","authors":"J. Merrifield, B. Poulson","doi":"10.2139/ssrn.3279856","DOIUrl":"https://doi.org/10.2139/ssrn.3279856","url":null,"abstract":"In this study we argue that the U.S. should follow the Swiss precedent, restoring a strong fiscal federalist system, with fiscal autonomy for state and local governments. A ‘no-bailout’ principle should be restored, such that state as well as local governments are subject to bankruptcy laws. Like their Swiss counterparts, state and local governments would then have an incentive to enact effective fiscal rules, mandating a balanced budget and reduction in unsustainable levels of debt. Swiss style fiscal rules are proposed for the federal government as well as state and local governments. With these fiscal rules in place elected officials would have an incentive to address the debt crisis. With effective fiscal rules, and enforcement of a ‘no-bailout principle, citizens would gain confidence in the ability of elected officials to pursue prudent fiscal policies. However, after a half century of declining dynamic credence capital, enacting the institutional reforms required for effective fiscal rules in the U.S. will be a formidable challenge.","PeriodicalId":221919,"journal":{"name":"ERN: National","volume":"143 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-11-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134411218","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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