Golden Rule (fiscal policy)

About: Golden Rule (fiscal policy) is a research topic. Over the lifetime, 661 publications have been published within this topic receiving 9789 citations.

A Response from Golden Rule to "ETS on 'Golden Rule'".

Abstract: In this rejoinder to Anrig's criticisms in the last issue of EM, Rooneg responds to Anrig's arguments and reasserts his position that the Golden Rule settlement was necessarg and reasonable and has been effective.

A Model of Local Financing in Theory and Practice: Lessons from Slovenia, New EU Member State

Abstract: Introduction When scholars talks about local government (LG in continuation), they often point to three basic values that the structures of LG may fulfill (Sharpe, 1973; Stewart, Greenwood, 1995): a) autonomy; because the existence of LG prevents over-concentration of political power and allows for different political choices in different localities, b) democracy; because LG encourages the active involvement of citizens in self-governance; c) effectiveness; because LG is efficient structure for delivery of services tailored to varying needs of localities. With decentralization, decision makers are closer to the results of their decisions, which is helpful in predicting the effects of decisions to be made and in turn supports effective allocation of resources. LG enables a better match of policies with local conditions and preferences. This supports effectiveness both objectively and subjectively (policies are closer to voters' preferences) and variation in solutions promotes innovation and diffusion of positive examples. LG is a feature of all EU states, despite many differences between them. Its importance has been strengthened by the adoption of the subsidiary principle in the Maastricht Treaty and by the EU Charter of LG. Criteria for Expenditure and Revenue Assignment The principles discussed below are among the basic foundations of the fiscal federalism model. As Rattso (2002) notes, model is based on four key assumptions: a) LG is mostly responsible for the delivery of public goods; b) the base for local finance is provided by local taxes (those who pay also benefit), c) there is considerable social mobility; d) in the case of local services, the catchments area is close to the area of administrative jurisdiction, i.e., spillover effects are minimal. The main principles of a decentralized system of public finance recommended by fiscal federalism theory are (Musgrave, 1957; Oates, 1972; King, 1984): a) the division of functions between central and LG is based on the subsidiary principle, which involves a considerable amount of fiscal and functional decentralization. (LG spending to national GDP, although this measure creates several methodological and data problems), b) The allocation of functions takes into account the specific territorial organization. If the structure is to diversified, with many, small units, the functional decentralization cannot be broad. Small units will not be able to perform functions effectively, c) The "golden rule" of the balanced budget (Damon, 2002) is enforced by regulations. In short, the rule states that current spending should be financed exclusively from current revenues, while capital investment expenditures are financed from capital receipts, d) The system of local finance is transparent for citizens and LG has an autonomy to form the structure of local expenditures. The most general classification of resources consists of three major categories: a) Own revenues of LG (revenues allocated to LG unconditionally and for an undefined period and that LG has at least some discretion to decide upon these categories of revenue, b) transfers from the central budget in form of grants, c) borrowed resources, d) shared revenues. (1) The model of local finance should conform to the following criteria: a) vertical allocation of resources should reflect the allocation of functions, b) a large proportion of local revenues should come from own sources, because this supports accountability, stimulates councillors and increases citizens interest in local activities, c) equalization system which ensures that each unit is able to provide at least a minimal set of standard services (Buchanan et al., 1999). Principles of Local Taxation There are various candidates for local taxes, and several criteria to help us choose appropriate mix for the country. Some of them are identical with requirements for good taxes in general, but others are specific to LG. …

Optimal education and pensions in an endogenous growth model

Abstract: In OLG economies with life-cycle saving and exogenous growth, competitive equilibria in general fail to achieve optimality because individuals accumulate amounts of physical capital that differ from the one that maximizes welfare along a balanced growth path (the Golden Rule). With human capital, a second potential source of departure from optimality arises, related to education decisions. We propose to recover the Golden Rule of physical and also human capital accumu- lation. We characterize the optimal policy to decentralize the Golden Rule balanced growth path when there are no constraints for individuals to finance their education investments, and show that it involves education taxes. Also, when the government subsidizes the repayment of education loans, optimal pensions are positive