Download or read book Evaluating Public Expenditures when Governments Must Rely on Distortionary Taxation written by James E. Anderson and published by World Bank Publications. This book was released on 1998 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: September 1998 This paper offers simple, robust operational rules for evaluating public spending in distorted economies-rules that are more complex than the border price rule but involve only one additional parameter: the marginal cost of funds. Anderson and Martin provide simple, robust rules for evaluating public spending in distorted economies. Their analysis integrates within a clean, unified framework previous treatments of project evaluation as special cases. Until recently it was widely believed that government projects could be evaluated without reference to the cost of raising tax revenues. The classic border price rule provided a simple and apparently robust procedure for project evaluation. But the border price rule developed in shadow pricing literature requires very strong assumptions to be valid when governments must rely on distortionary taxation and are unable or unwilling to cover the costs of the project through user charges. Anderson and Martin use a rigorous formal model in which governments must rely on distortionary taxation to explore the welfare consequences of governments providing different types of goods. They show that the border price rule is accurate only in one rather special case: when project outputs are sold at their full value to consumers - something that is difficult to do with a public good such as a lighthouse or a functioning judicial system. When a publicly provided good is sold for less than its full value to consumers, one must take into account the implications for government revenues of providing public goods. Anderson and Martin present project evaluation rules that are more complex than the border price rule but involve only one additional parameter: the compensated marginal cost of funds for the taxes on which the government relies. The rules suggested involve adjusting the fiscal revenues the project generates (or destroys) by the marginal cost of funds before comparing them with the assessed benefits to project producers and consumers. In the case of a protected but tradable good provided by the government, the result is a shadow price that is below the world market price. Where projects produce output that is sold without charge, the costs of the project inputs must also be adjusted using the marginal cost of funds. In intermediate cases where the government levies user charges that fall below the full value of the goods to the private sector, the revenue shortfall from the project must be adjusted by the marginal cost of funds. This paper-a product of Trade, Development Research Group-is part of a larger effort in the group to assess the consequences of policy interventions. Will Martin may be contacted at [email protected].
Download or read book Evaluating Public Expenditures When Governments Must Rely on Distortionary Taxation written by James E. Anderson and published by . This book was released on 2016 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper offers simple, ...
Download or read book Contingent Government Liabilities written by Hana Polackova and published by World Bank Publications. This book was released on 1998 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: October 1998 Many governments have faced serious fiscal instabilities as a result of their growing contingent liabilities. But conventional fiscal analysis and institutions fall short in addressing contingent fiscal risks. What approaches in fiscal analysis and standards for public sector management would foster sound fiscal performance? And how can policymakers be made accountable for recognizing the long-term costs of both direct and contingent forms of government activity in their decisions? Governments are increasingly exposed to fiscal risks and uncertainties for three main reasons: * The increasing volume and volatility of international flows of private capital. * The state's transformation from financing services to guaranteeing that the private sector will achieve particular outcomes. * Moral hazards arising in markets because the government is perceived to have residual responsibility for market outcomes. Sources of fiscal risk may be direct or contingent (a liability only if a particular event occurs). Whether direct or contingent, they are either explicit (recognized as a government liability by law or by contract) or implicit (a moral obligation reflecting public expectations and pressure from interest groups). The recent Asian crisis revealed that major moral hazards exist in markets and that sizable hidden fiscal risks may arise from contingent forms of government support. Governments must understand and know how to handle contingent liabilities if they are to avoid the danger of sudden fiscal instability and realize their long-term policy objectives. They can reduce fiscal risks by incorporating contingent liabilities into their analytical, policy, and institutional public finance frameworks. Governments can address fiscal risk through three channels in particular, says Polackova: * By including contingent and implicit financial risks in their fiscal analysis and (to deter moral hazard in the market) by publicly acknowledging the limits of state responsibilities. * By reflecting the cost of contingent liabilities in policy choices, budgeting, financial planning, reporting, and auditing. * By developing institutional capacity to evaluate, regulate, control, and prevent financial risk in both the public and private sectors. Given the increasingly serious implications of contingent government liabilities for the fiscal outlook of countries, Polackova argues that it is time for the World Bank, the International Monetary Fund, and others to: * Incorporate government contingent fiscal risks in their analysis of a country's fiscal sustainability, policies, and institutions. * Require countries to disclose information regarding their exposure to contingent fiscal risks. * Help countries embrace contingent liabilities in their analytical, policy, and institutional public finance frameworks. This paper-a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Region-is part of a larger effort in the region to enhance the Bank's analytical and operational work in public finance. The author may be contacted at [email protected].
Download or read book New Developments in Computable General Equilibrium Analysis for Trade Policy written by John Gilbert and published by Emerald Group Publishing. This book was released on 2010-10-05 with total page 461 pages. Available in PDF, EPUB and Kindle. Book excerpt: Intends to present the developments in the methodology and practice of CGE techniques as they apply to various issues in international trade policy. This title is suitable for academic researchers working in trade policy analysis and applied general equilibrium, and advanced graduate students in international economics.
Download or read book Estimating Wealth Effects Without Expenditure Data Or Tears written by Deon Filmer and published by World Bank Publications. This book was released on 1998 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: October 1998 The relationship between household wealth and educational enrollment of children can be estimated without expenditure data. A method for doing so-which uses an index based on household asset ownership indicators-is proposed and defended in this paper. In India, children from the wealthiest households are over 30 percentage points more likely to be in school than those from the poorest households, although this gap varies considerably across states. To estimate the relationship between household wealth and the probability that a child (aged 6 to 14) is enrolled in school, Filmer and Pritchett use National Family Health Survey (NFHS) data collected in Indian states in 1992 and 1993. In developing their estimate Filmer and Pritchett had to overcome a methodological difficulty: The NFHS, modeled closely on the Demographic and Health Surveys, measures neither household income nor consumption expenditures. As a proxy for long-run household wealth, they constructed a linear asset index from a set of asset indicators, using principal components analysis to derive the weights. This asset index is robust, produces internally coherent results, and provides a close correspondence with data on state domestic product and on state level poverty rates. They validate the asset index using data on consumption spending and asset ownership from Indonesia, Nepal, and Pakistan. The asset index has reasonable coherence with current consumption expenditures and, more importantly, works as well as-or better than-traditional expenditure-based measures in predicting enrollment status. The authors find that on average a child from a wealthy household (in the top 20 percent on the asset index developed for this analysis) is 31 percent more likely to be enrolled in school than a child from a poor household (in the bottom 40 percent). This paper-a product of Poverty and Human Resources, Development Research Group-is part of a larger effort in the group to inform educational policy. The study was funded by the Bank's Research Support Budget under the research project Educational Enrollment and Dropout (RPO 682-11). Deon Filmer may be contacted at [email protected].
Download or read book Fiscal Federalism and Macroeconomic Governance written by Anwar Shah and published by World Bank Publications. This book was released on 1998 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: November 1998 Shah concludes that, contrary to a common misconception, decentralized fiscal systems offer more potential for improved macroeconomic governance than do centralized fiscal systems, because they require greater clarity about the roles of various players and decisionmakers and-to ensure fair play-greater transparency in rules governing interactions. In analyzing the institutional environment for macroeconomic management, Shah discusses monetary policy, fiscal policy, and subnational borrowing. In analyzing the macroeconomic dimensions of securing an economic union, he discusses the regulatory environment, tax coordination, transfer payments and social insurance, intergovernmental fiscal transfers, and regional equity. Finally, he discusses the challenges of globalization and draws lessons from experience about fiscal reform in developing countries: Among them: * Monetary policy is best entrusted to an independent central bank with a mandate for price stability. * Fiscal rules accompanied by gatekeeper intergovernmental councils or committees provide a useful framework for fiscal discipline and coordination of fiscal policy. * The integrity and independence of the financial sector contribute to fiscal prudence in the public sector. * To ensure fiscal discipline, governments at all levels must be made to face the financial consequences of their decisions. * Societal norms and consensus about the roles of various levels of government and limits to their authority are vital to the success of decentralized decisionmaking. * Tax decentralization is a prerequisite for subnational access to credit markets. * Higher-level institutional assistance may be needed to finance local capital projects. * An internal common market is best preserved by constitutional guarantees. * Intergovernmental transfers in developing countries undermine fiscal discipline and accountability while building transfer dependencies that cause a slow economic strangulation of fiscally disadvantaged regions. * Periodic review of jurisdictional assignments is essential to realign responsibilities with changing economic and political realities. * Finally, and contrary to a common misconception, decentralized fiscal systems offer more potential for improved macroeconomic governance than do centralized fiscal systems. This paper-a product of the Country and Regional Relations Division, Operations Evaluation Department-is part of a larger effort in the department to learn lessons of experience in improving public sector performance in developing countries. The author may be contacted at [email protected].
Download or read book The Effect of the United States Granting Most Favored Nation Status to Vietnam written by Emiko Fukase and published by World Bank Publications. This book was released on 1999 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: If the United States grants Vietnam most favored nation status, both countries would benefit. Vietnamese exports to the United States would more than double, and Vietnam would gain substantial welfare benefits from improved market access and increased availability of imports. For the United States, lowering the current high tariff against Vietnam would improve welfare by reducing costly diversion away from Vietnamese products.
Download or read book GATT Experience with Safeguards written by J. M. Finger and published by World Bank Publications. This book was released on 1998 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: October 1998 Suggested guidelines for a safeguards process that emphasizes an import restriction's impact on the domestic economy: Domestically, who would benefit from the proposed restriction and who would lose, and by how much? And how would import-using interests be affected? Realizing that trade liberalization would require periodic adjustments because of problems in particular industries, GATT's framers provided that tariff reductions that led to such problems could be renegotiated; in an emergency a country could raise its tariff first and negotiate compensation with the principal exporting countries later. GATT lists many provisions that allow import restrictions, provisions that, over time, have proven quite fungible. Renegotiations were replaced by negotiated quantitative restraints (VERs), which were replaced by antidumping. The problem (troublesome imports) was always the same, but the instruments changed. And none of the instruments made much political or economic sense. They did not help a government isolate those import restrictions for which the benefits to the domestic economy would exceed the costs. And politically, the procedures through which renegotiations, VERs, or antidumping actions are decided provide a public tribune for interests that would benefit from protection but provide no voice for domestic interests that would bear the costs of restricted access to imports. Finger offers guidelines for a safeguards process that makes more economic and political sense: * Identify the costs and losers as well as the benefits and winners. * Be clear that the action is an exception to the principles underlying the liberalization program. Emphasize that too many such exceptions would constitute abandonment of the liberalization program and its benefits. Included in the investigation process should be an expression of the costs the proposed restriction would impose. * Don't sanctify the criteria for the action. Procedures should not presume, as antidumping does, that there is some good reason for granting exceptions. Providing a list of good reasons invites protection-seekers to demonstrate that they qualify and places the government in the position of having to demonstrate that they do not. Procedures should stress that the function of the review is to identify the benefits, costs, and domestic winners and losers from the action requested. This paper is a product of Trade, Development Research Group. The author may be contacted at [email protected].
Download or read book Thailand s Corporate Financing and Governance Structures written by Pedro Alba and published by World Bank Publications. This book was released on 1998 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: November 1998 Weaknesses in corporate governance and the fragile financial structure of many corporations contributed to, and deepened Thailand's recent financial crisis. Large corporations need to reduce their vulnerability to economic shocks and improve corporate governance; smaller firms should achieve a more stable funding structure. Alba, Claessens, and Djankov assess Thailand's policy options for reducing large corporations' vulnerability to economic shocks and improving their corporate governance - and for providing smaller firms a more stable funding structure. Using data for firms listed on Thailand's stock exchange, they empirically assess the relative importance of various factors determining the cost of capital, the availability of financing, and policies and distortions that affect corporate governance in nonfinancial firms. The empirical findings highlight weaknesses in corporate governance and the inherent risks in Thailand's corporate financing structures. They conclude that the most important ask in improving the structure of corporate financing and the framework for corporate governance is to change incentives. This will involve: * Accelerating legal reform, including reform of bankruptcy and foreclosure laws. * Improving bank monitoring of enterprise management and encouraging banks to develop more arm's-length relationships with firms. This will require greater transparency and disclosure of ownership relationships and stricter enforcement of insider and related lending limits, violation of which contributed poor intermediation and the recent crisis. * Improving disclosure and accounting practices. Self-regulatory agencies may need to play more of a role, possibly with more legal power to discipline violators. * Better enforcement of corporate governance rules. The formal structure for corporate governance is standard but enforcement is weak. * Facilitation of equity infusions. Investors - especially minority shareholders - may need to play a more direct role in monitoring and disciplining managers. To attract new infusions of equity, new equity owners may need more-than-proportional representation on the board of directors until other investor protection mechanisms are strengthened. * Improving the framework for corporate governance. A broad public discussion of corporate governance, similar to recent discussions in the United Kingdom and elsewhere, may be needed to clarify the distribution of control in the economy's real sector. * Strengthening institutions responsible for gathering and analyzing data on firms of all sizes and for monitoring firm performance and behavior. This paper-a product of the Economic Policy Unit, Finance, Private Sector, and Infrastructure Network-is part of a larger effort in the network to study the performance and financing structures of East Asian corporations.
Download or read book Regional Integration Arrangements written by Dean A. DeRosa and published by World Bank Publications. This book was released on 1998 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The East Asia Crisis and Corporate Finances written by Michael Pomerleano and published by World Bank Publications. This book was released on 1998 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Explanations of the causes of the Asian crisis have focused on macroeconomic factors leading to the crisis. This paper offers a complementary corporate distress perspective linking the crisis to corporate finances. Key ratios for companies in various countries are presented in the paper. The global benchmarking imposes a consistent cross-border analysis of financial risk and performance, and sheds light on the crisis. The study provides a statistical review of the financial practices and performance of corporates in Asia: Hong Kong, Indonesia, Korea, Malaysia, Philippines, Taiwan, and Thailand benchmarked against financials of corporates in other countries: Latin America, and industrialized countries: France, Germany, Japan and USA. A thematic point that comes across in all the results of the corporate financial analysis is unsustainable rapid (and probably excessive) investment in fixed assets financed by excessive borrowing in some Asian countries- e.g., Indonesia, Korea and Thailand. The East Asian investment-spending spree resulted in poor profitability, reflected in low, and declining return on equity, and return on capital employed. It leads to the conclusion that at the core of the corporate crisis were financial excesses that violated prudent financial practices, and eventually lead to the inevitable financial distress we are witnessing. Therefore, the empirical findings presented in the paper lend credence to the view advanced by Krugman that crony capitalism was at the core of the crisis. Crony capitalism was manifested in supportive bad policies-e.g., implicit government guarantees, and poor banking supervision- that lead to poor credit allocation decisions in the banking dominated financial system. Preliminary findings suggest as well vast differences in Economic Value Added between countries- developing and developed alike. The conclusions from an economic value added approach indicate, that in an era of increasing capital mobility, corporates are not adhering to global standards in creating shareholder value. The analysis leads to policy conclusions.
Download or read book Nadeem ul haque written by and published by World Bank Publications. This book was released on with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Present Outlook for Trade Negotiations in the World Trade Organization written by John Croome and published by World Bank Publications. This book was released on 1998 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: October 1998 With their wide range of concerns, developing countries cannot speak with a single voice in the World Trade Organization. But to the extent that they can present a common front and identify issues on which they can achieve gains, they will be better placed to help shape negotiations rather than react to them. The Uruguay Round agreements established the World Trade Organization (WTO), overhauled and strengthened the GATT rules on trade in goods, and added rules on trade in services and intellectual property. Individual countries made wide-ranging commitments to liberalize trade policies. A new round of multilateral trade negotiatons may be launched in the year 2000 or soon after. Croome reviews the probable agenda for these negotiations and reactions thereto. Agriculture is a certainty for negotiations, with agricultural exporters insisting on liberalized markets. Net food importers fear such reforms will increase food costs and endanger food security. Trade in services is certain to be on the agenda, but some developing countries see little to gain in this area, unless their workers gain opportunities to provide services in other countries. Many developing countries could benefit from further negotiations on tariffs. Developing countries are determined to avoid opening up the Uruguay Round agreement on textiles and clothing. They also fear that any WTO agreement on environmental issues will provide excuses to increase barriers on their exports. They all oppose WTO discussion of labor standards. They are divided about whether to reach an agreement on investment but tend to favor seeking an agreement on competition issues. Developing countries' attitudes toward further WTO negotiations are divided; they tend to be negative, but may be shifting toward support. Small and underdeveloped countries are unenthusiastic because they cannot participate effectively in negotiations in Geneva and are distracted by upcoming negotiations with the European Union. Many developing countries feel their levels of commitment are already heavy, they need more time to absorb the consequences of their commitments, and it would be counterproductive to rush into another round of negotiations. They argue that industrial countries have yet to deliver on liberalization important to their trade. Countries that favor negotiations favor a broad agenda for negotiations because they have relatively wide trade interests, best served by a single negotiation that offers something for all participants and allows tradeoffs. This paper-a product of Trade, Development Research Group-is part of a larger effort in the group to assist developing countries liberalize their trade through participation negotiations at the World Trade Organization. The author may be contacted at [email protected].
Download or read book Heterogeneity Among Mexico s Micro enterprises written by Wendy V. Cunningham and published by World Bank Publications. This book was released on 1998 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Measuring the Dynamic Gains from Trade written by Romain Wacziarg and published by World Bank Publications. This book was released on 1998 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: November 1998 Empirical analysis confirms that a policy of trade openness has a strong positive impact on economic growth. The accelerated accumulation of physical capital accounts for more than half this growth. Enhanced technological transmissions and improvements in the quality of macroeconomic policy each account for about 20 percent of the effect of openness on growth. Wacziarg investigates the links between trade policy and economic growth using data from a panel of 57 countries from 1970-89. This is the first attempt to empirically evaluate, in a cross-country context, the respective roles of various theories of dynamic gains from trade in explaining the observed positive impact of trade openness on economic growth. Wacziarg uses a new measure of trade openness, based on the effective policy component of trade shares, in a simultaneous equations system aimed at identifying the effect of trade policy on several determinants of growth. The results suggest that a policy of trade openness has a strong positive impact on economic growth. The accelerated accumulation of physical capital accounts for more than half this effect. Enhanced technological transmissions and improvements in the quality of macroeconomic policy each account for about 20 percent of the impact of trade openness on growth. This decomposition is robust to alternative specifications and time periods. Wacziarg also successfully tests whether the empirical methodology captures all or most of the effects of trade policy on growth. The lack of statistically significant results concerning several other channels may be due to measurement problems. The black market premium may be a weak proxy for the efficiency of the price system. Moreover, international technological transmissions are very hard to measure, so there may be a downward bias in the estimates based on the manufactured exports channel, and a corresponding overstatement of other channels. This paper-a product of the Development Prospects Group, Development Economics-is part of a larger effort in the Bank to analyze the relationship between openness and economic growth. The author may be contacted at [email protected].
Download or read book Reducing Air Pollution from Urban Passenger Transport written by Mark Heil and published by World Bank Publications. This book was released on 1998 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: October 1998 A policy considered in isolation may be ineffective because of the countervailing impact of other factors. And the success of a policy may itself lead to perverse incentives. Thus it is important to design complementary policies that support the original goal. Controlling air pollution from urban transport requires attention to land use planning, transport needs and modes, and air quality. Air quality is declining in urban areas, in part because of the rapid motorization of societies worldwide. To combat the problem, various pollution control strategies have been used or proposed for urban passenger transport. Heil and Pargal develop a simple framework to analyze these strategies. The virtue of this framework is its simplicity and its separation of factors. The authors examine the point of impact of different policy levers and categorize different instruments in a way that should help policymakers choose among them. The framework explicitly recognizes behavioral incentives, especially the fact that offsetting changes in consumer behavior can often undermine the original intent of particular policies. Among the findings: * Policies aimed at improving transport efficiency often improve air quality at the same time. * But supply-side policies to relieve traffic congestion sometimes conflict with supply-side measures to control air pollution. Improvements in roads and traffic, for example, may increase private motorized traffic conditions, making it difficult to assess the net effect of the improvements on air pollution. * There seems to be considerable scope for low-cost solutions to air quality problems associated with the transport sector. Inexpensive, low-technology solutions, such as establishing bus lanes or paving dirt roads, substantially improve both transport efficiency and air quality. * Behavioral change is difficult when viable transport alternatives are unavailable. A viable public transport system is essential to reduce transport-caused air pollution in densely populated areas. * Fuel and emission standards should become stricter over time. Standards should be gradually ratcheted up to give domestic auto industries the incentive to develop and adopt cleaner technology. This paper-a product of Infrastructure and Environment, Development Research Group-is part of a larger effort in the group to study the impact of motorization on air pollution. Sheoli Pargal may be contacted at [email protected].
