Showing papers on "Subsidy published in 1991"

Income Redistribution in a Common Labor Market

Abstract: When households are mobile among jurisdictions, income redistribution by individual jurisdictions creates fiscal externalities. A model of interjurisdictional migration is used to study the nature of this redistributive externality. Analysis of optimal redistribution and optimal corrective subsidies from higher-level governments shows that benefit levels for the recipients of income transfers and tax rates on mobile taxpayers should be equalized across jurisdictions. A system of jurisdictions with a common labor market can achieve welfare improvements through coordination of "domestic" redistributive policy or through the intervention of a higher-level government. Copyright 1991 by American Economic Association.

Economic Effects of Federal Credit Programs

Abstract: Since 1980, the federal government has directly subsidized one-third of all nonfederal borrowing. This paper presents numerical estimates of the effects of federal lending. Existing credit subsidies appear to have important effects on the allocation of credit, but little effect on aggregate investment. Efficiency costs are shown to be large (approximately 1/3 percent of GNP). Government costs exceed fifty cents per dollar of incremental targeted lending. Interactions among programs can eliminate much or all of the original gain provided by a subsidy, especially if borrowers are rationed. The paper also examines the effects of several policy reforms. Copyright 1991 by American Economic Association.

Vertical Foreclosure and International Trade Policy

Abstract: International differences in the cost of production of a key intermediate product can mean that a domestic firm is dependent on supplies from a foreign vertically integrated firm. This paper considers the incentives for the foreign firm and foreign country to supply the domestic firm when the firms compete in a Cournot or Bertrand market for the final product. The vertical supply decision is significantly affected by domestic supply conditions for the input and a domestic tariff on final product imports. Optimal policy by the exporting country may require a tax on both exports, or a subsidy on both exports. Countries that are dependent on imports of a key intermediate product or raw material from a dominant world supplier are often concerned about the price and the availability of imports. A notable current example involves the computer industry. Japanese suppliers (with the help of the Japanese government) recently restricted the exports of DRAM semiconductors, substantially raising their price.' These suppliers control about 80% of the market for semiconductors and the higher prices and shortage in supply have forced U.S. producers of computers to curtail production and increase prices. Vertically integrated Japanese firms such as Toshiba and N.E.C. have benefitted both from increased profits in the export market for semiconductors and from the improvement in their competitive position in the market for final computers. As this example indicates, the price and availability of imported supplies can depend on both public and private incentives in the exporting country. In this paper, we first examine the private incentives for a vertically integrated firm to export an intermediate product to a higher cost rival, lowering its rival's costs. The exporting firm may choose vertical foreclosure, thus fully cutting off supplies. We then consider the public interest of the exporting country: does the exporting country gain by encouraging the export of the intermediate product, or alternatively, might "government foreclosure" occur? The government is in a position to affect the quantity of exports of both the input and the final product by an appropriate choice of export tax and subsidy policies.

Down in the Dumps: Administration of the Unfair Trade Laws

Abstract: During the past decade the administration of the U.S. trade laws has become increasingly controversial. Trade experts have long questioned the methods used by the Department of Commerce, International Trade Administration, which is responsible for calculating dumping and countervailable subsidy rates on imported goods. This study is the first to bring together attorneys and economists who are experts in the area of trade to examine and criticize the Department's practices and recommend ways to improve them. The critical issue addressed in this book is how trade laws should be applied so that the results are consistent with both economic theory and business behaviour and with the obligations of the US and other countries under the General Agreement on Tariffs and Trade (GATT). Contending that the laws are administered in a way that tilts toward protectionism, "Down in the Dumps" suggests changes that would not require fundamental changes in law, but rather changes in the way it is administered. Chapters include Richard Boltuck and Robert Litan on an overview of the issues; Tracy Murray on dumping margins methodology; David Palmeter, Joseph Francoise and Jeffrey Anspacher on calculating subsidy rates; David Palmeter on the fairness of administrative procedures; and Robert Baldwin and Michael Moore on the political economy behind the administration of the trade remedy laws. The concluding chapter, by Terence Stewart, criticizes several of the earlier chapters from a persepctive that is generally supportive of current administrative practices.

The Costs of Indonesian Sugar Policy: A Policy Analysis Matrix Approach

Abstract: Indonesian sugar policy is a complex web of contradictory policies, including mandatory production, price supports, and fertilizer and credit subsidies. The policy analysis matrix (PAM) was developed by Monke and Pearson to provide a more complete perspective on social profitability and the divergence between private and social costs than other commonly used social cost-benefit measures. The PAM is used to analyze the effects of Indonesian sugar policy on sugar production in irrigated and dryland areas on Java, the main sugar-producing region in Indonesia, and to identify the distribution of resource transfers.

Competitiveness and Industrial Restructuring in Czechoslovakia, Hungary and Poland

Abstract: Transition to the market in Eastern Europe will require a great deal of restructuring of production involving the contraction and even closure of certain branches and the expansion of others, including some new ones. In the course of this, many enterprises will have to be shut down. Unfortunately, even in the countries which have already undergone substantial price liberalization, there are still many distortions in the price system due to monopoly, remaining subsidies on production, and taxes related to trade (e.g. import duties). Consequently, evaluation of the profitability of firms or the branches in which they operate is likely to yield very misleading results if carried out at domestic prices. Accordingly, using detailed input-output data and information on world market prices for Czechoslovakia, Hungary and Poland, this paper seeks to recalculate value added for each branch in terms of world market prices. Having done this, domestic resource costs are calculated to allow branches to be ranked according to their profitability. The paper then examines the most profitable and least profitable branches in each country in some detail.

Unravelling Housing Finance: Subsidies, Benefits, and Taxation

Abstract: Part I: Background: Why is housing subsidized? Public spending on housing Trends in housing costs Part II: Subsidy systems: Subsidy principles and problems Local authorities: finance and control Local authority housing subsidies Housing association subsidies Other housing subsidies Part III: Housing benefits: Housing benefit: principles and problems Part IV: Taxation: Principles of housing taxation Housing taxation in Britain Part V: Evaluation: The economic return on local authority housing Distributional effects of the system Subsidies to local authorities and housing associations Patterns of incentives Part VI: Reform: The reform agenda Untangling housing finance.

The employment creation effects of factor subsidies: some estimates for northern ireland manufacturing industry, 1955‐1983

Abstract: In this paper, I use estimates of the parameters of an industry demand function and a CES production function for Northern Ireland manufacturing in order to measure the relative impact of factor subsidies on employment, capital, and output. A simulation model is able to differentiate the output and substitution effects of subsidies. The results indicate that since manufacturing industry in the province tends to operate with a labor-intensive technology and, since its price-elasticity of demand for output is very low, the employment creating effects of capital subsidies are strongly negative.

Are Economists' Traditional Trade Policy Views Still Valid?

Abstract: Recent analysis of trade policies under imperfectly competitive market conditions as well as in situations where trade in high-technology products is important have raised doubts whether economists should continue their traditional opposition to trade taxes and subsidies. This paper evaluates the new theoretical arguments for interventionist trade policies by comparing them with the traditional arguments for and against free trade, investigating the empirical evidence supporting the conditions assumed in the new models, appraising the realism of the behavior assumptions of these models and the sensitivity of their conclusions to changes in these assumptions, and considering the political economy implications of these conclusions. The general conclusion is that there are serious practical difficulties with the interventionist arguments of the 'new' trade theorists, as they themselves recognize, just as there are with such traditional arguments for trade intervention as the terms-of-trade case for protection. However, the new industrial organization approach to trade theory has already provided valuable insights into trade behavior in international markets and promises to provide many more as more realistic behavior models are developed.(This abstract was borrowed from another version of this item.)

Unjust Equity: An Examination of California's Transportation Development Act

Abstract: Federal subsidies of public transit, particularly transit operations are declining and the responsibility for supporting transit is falling increasingly on states and localities. In California, the Transportation Development Act (TDA) has become the state's principal source of transit operating subsidies. This paper shows that the strict per capita allocation formulas of the TDA strongly favor lightly patronized suburban transit service over more heavily patronized service in the central cities. Transit riders in San Francisco, for example, receive a TDA subsidy of $0.13 per trip, while the TDA subsidy to transit patrons in suburban Livermore is over $5.00 per trip. The built-in suburban bias of the TDA is the result of partisan compromises made to secure passage of the Act in 1971; compromises to assuage a Republican governor opposed to new taxes and to include the interests of rural and suburban counties. The result has been a proliferation in California of new, well-funded, and expanding suburban transit operators that attract few riders while older, heavily patronized central city transit operators are forced to cut service because of funding shortfalls. The paper concludes by proposing a more efficient and equitable method for allocating TDA funds than the current formula which, in the name of equity provides all Californians with a "fair share" of public transit, whether or not they use it.

Health issues at the US-Mexican border

Abstract: With a rapidly growing population, increasing manufacturing activity, and increased interdependence, health issues on the US-Mexican border are demanding greater attention. It is unlikely that any other border in the world separates two nations having such variety in health status, entitlements, and utilization. Binational initiatives in the areas of environmental health and sanitation are clearly needed. Further cooperation between the United States and Mexico in provision of health services is warranted and will probably require enhanced federal funding or subsidies to be successful. (JAMA. 1991;265:242-247)

On justifications for public support of the arts

Abstract: A large literature has discussed the philosophical and economic arguments that might justify government involvement and subsidies to public charities for the arts. Major disagreements characterize this literature. On the one hand, advocates for the arts justify government subsidies by the inherent value of art for the cultural development of our society, the education of our children, and the enjoyment of our citizens. On the other hand, some analytically-mlnded economists (but not all) may argue that the free market works reasonably well on its own, without much governmental interference, unless some welldefined market failure causes a rni~allocation of resources that could justify public action.

Domestic Public Debt of Externally Indebted Countries

Abstract: This study discusses the evolution of domestic public debt in several indebted countries and its relationship with their external debt and underlying fiscal developments. It examines the links between domestic and external debt, taxes, subsidies, and government spending, and reviews strategies for managing domestic public debt.

Federal housing policy and preservation: Historical evolution, patterns, and implications

Abstract: This paper considers the evolution and patterns of federal low‐income1 housing policies and programs over roughly the past half‐century. It begins with an overview of the multifaceted involvement of the federal government in housing — only one aspect of which is its intervention in the low‐income sector. This is followed by an overview of federal low‐income housing policy from the New Deal to today. The underlying assumptions and approaches of these policies are then considered with respect to such considerations as the government's presence and role, its targeting of assistance, and the selection of subsidy levels and vehicles. The paper concludes with a brief review of the implications of the historical record for future policy.

Condominium and Cooperative Housing: Transactional Efficiency, Tax Subsidies, and Tenure Choice

Abstract: TWENTY-FIVE years ago, cooperative apartment buildings were uncommon in the United States, and condominiums were virtually nonexistent. Since then, however, both forms, and particularly condominiums, have spread rapidly through the real estate market. This article explores the factors responsible for this development. In the process, it also assesses the relative transactional efficiency of consumer ownership and investor ownership in multiunit housing. I argue that two factors appear principally responsible for the recent spread of cooperatives and condominiums. First is the large tax subsidy to owner-occupied housing that has existed since the Second World War and that has been particularly large during the past two decades. Second is innovation in the forms available for organizing ownership in multiunit dwellings. A variety of considerations suggest that the first of these factors has been more important than the second and that, in the absence of the tax subsidy, cooperatives and condominiums would occupy a much smaller share of the housing market than they do at present. In support of this analysis, this article offers the first sophisticated calculations of the magnitude of the pure tax subsidy to owner-occupied housing, as

Agriculture, Growth, and Redistribution of Income: Policy Analysis With a General Equilibrium Model of India

Abstract: A Framework for Policy Analysis. Indian Economy and Agriculture since Independence. A Policy Model for Agriculture, Growth and Redistribution of Income (Agri Model). Scheme of Analysis and the Reference Scenario. Public Distribution Policies. Foreign Trade and Aid Policies. Rural Works Programs. Terms of Trade Policies. Fertilizer Subsidy. Development of Irrigation. Overview: Insights and Implications. References. Indexes.

Effective demand, enterprise reforms and public finance in China

Abstract: Economic reform in China Athar Hussain and Nicholas Stern This paper examines some problems of transition from a command to a market economy through an analysis of the most important example to date – the reforms in the Chinese economy since the late 1970s. Our focus is on the links between enterprise reforms, effective demand and public finance. The reforms have created a curious and problematic hybrid of market and command economies with serious problems of coordination. They have concentrated almost exclusively on the delegation of decision-making to enterprises from the higher to lower tiers of the government without taking into account its implications for investment, consumption and public finance. An understanding of future policy and lessons for other countries requires a careful examination of the effects of these past policies. Granting discretion to enterprises over investment and wages has resulted in both an investment and consumption boom but, paradoxically, a fall in profits. There are strong reasons to suppose that the investment ratio has been too high in recent years, fuelling inflation and slowing additions to supply by prolonging the gestation period of investment. There has been a large increase in liquid assets in the hands of households, which makes their expectations increasingly important for macroeconomic policy. There is need for concerted financial innovation to diversify household wealth away from liquid assets. Finally, the changes in the composition of government revenue and expenditure are disturbing. There is an urgent need for a flexible and broad-based tax system and for reducing price subsidies and subsidies to loss-making enterprises.

Urban housing reform in China : an economic analysis

Abstract: The purpose of this paper is to analyze some major elements of a market-oriented reform drawing on the experiments carried out in selected cities prior to the 1988 Reform Plan. Following a general introduction about the status and context of reform in China, the paper selects some critical issues for the introduction of market mechanisms in urban housing. First, it analyzes pricing and allocation reforms in the existing stock. The present policy of low rents where urban households spend about 1% of cash income on housing is unsustainable and leads to ever growing distortions and large scale subsidies. The paper provides an analysis of the tenure choice based on the user-cost of capital concept to show the functional relationship between rent reforms and the potential development of home ownership in Chinese cities. Pursuing further the critical distinction between the demand for housing ownership and that for housing services, the significant efficiency benefits that can be derived from allowing the free exchange and allocation of existing housing units are evaluated. Finally, the paper provides suggestions to improve the present approach to housing reforms in China regarding sale prices, the setting of rents and credit conditions offered to finance housing sales. Particular stress is placed on property rights reforms to achieve maximum economic and social benefits from urban housing reform.

Nongovernmental Organizations and the World Bank: Cooperation for Development

Abstract: This book is a collection of papers on the role, potential, and limits of Nongovernmental Organizations (NGOs) in development. It combines a global review of what NGOs are and what they can do in the development process with an analysis of the World Bank's experience in working with NGOs in its operations. A brief review of the theoretical perspectives on NGOs is attempted below as a backdrop to the detailed discussion of the role and potential of NGOs in development in the following report. Any organization that is not a part of government qualifies as a NGO but the term typically denotes organizations that are both nongovernmental and not-for-profit. This broad definition covers a wide range of organizations. The author's primary concern in this book is with a segment of this large set -- those that focus on the development activities and issues of the developing world. The scope of their work may be local, national, or international, and their areas of interest may span one or more sectors of the economy.

Measuring the decline in transit productivity in the U.S.

Abstract: Starting in the mid‐1960's, US government policy encouraged the public takeover and subsidy of what had been a self‐supporting, privately owned transit industry. The combination of public ownership and subsidy halted the long‐term decline in ridership, but it also led to the growth of an enormous financial deficit. Using individual data from 62 transit properties to measure the change in productivity (output per dollar of input) over the period 1950–1985, this paper examines the relationship between productivity and government subsidies. The magnitude of the productivity decline is surprising: indeed, if productivity had merely remained constant since 1964, the year the subsidy program began, total operating expenses would be more than 40% lower. To put that figure in perspective, this is enough cost reduction to erase most of the current operating deficit—without raising fares.

Extending the economic theory of regulation to the form of policy

Abstract: The mutually beneficial connection between industries and the governments that regulate them is the subject of a large literature led by Stigler (1971). What has not been studied is how firms choose their desired policies from the set including entry barriers, price floors, subsidies, and demand stimulation. We take as given that government and incumbents from the supply and demand for regulation and explore the choice of political product.

Financing higher education in India

Abstract: This paper is an attempt to analyse the present pattern of funding higher education in India and to discuss the desirability and feasibility of various alternative methods of funding the same. Higher education in India is basically a state funded sector. But as higher education benefits not only society at large, but also individuals specifically, and as it attracts relatively more privileged sections of the society, there is a rationale for shifting the financial burden to the individual domain from the social domain. It is argued here that given the resource constraints and equity considerations, financing higher education mostly from the general tax revenue may not be a desirable policy in the long run. Accordingly some of the alternative policy choices are discussed, including financing higher education from the public exchequer, student loans, graduate tax, student fees, and the role of the private sector. Among the available alternatives, it is argued that a discriminatory pricing mechanism would be relatively more efficient and equitable. While given the socioeconomic and political realities, the government has to continue to bear a large responsibility for funding higher education, instead of relying on a single form of funding, efforts should be made to evolve a model of funding that provides a mix of the various methods. It is also argued that fee and subsidy policies need to make distinctions across various layers and forms of higher education.

Housing Finance in the UK: An Introduction

Abstract: Part 1 Housing and housing finance: subsidies to housing an overview of UK housing. Part 2 Alternative approaches to housing finance: frameworks for housing finance administrative framework for housing policy in the UK the economic reationale for market intervention. Part 3 Public expenditure: what is public expenditure? public expenditures - trends and patterns the development of the current system the present system evaluation of PES system local government finance in the UK. Part 4 Local authority housing: capital expenditures the new (1990) regime of capital funding current expenditure - the old (1980) system recent trends in the HRA new regime for revenue funding local authority finance in Scotland. BOX - the new subsidy system. Part 5 Housing association finance: housing associations - the context capital funding revenue funding rent setting housing associations in the 1990s housing association accounts. Part 6 Current issues in the management of social rented housing: tenure diversification rent structures controlling and managing budgets performance indicators and value for money. Part 7 Owner occupation - finance for home ownership: the house purchase process mortgage finance building societies competition and deregulation mortgage markets after deregulation. reading. Part 8 Owner occupation and the housing market: the market for owner-occupation house prices in the UK defining subsidies to home owners capital grants to owner occupiers the housing implications of the community charge the cost of home ownership. Part 9 Private rented housing: rent controls and the housing system the private rented sector today the 1988 reforms of the private rented sector alternative reform for furnished private renting. Part 10 Help with housing costs: economic questions, affordability and income subsidies housing - benefit - beveridge to the 1988 reforms the 1988 housing benefit system housig benefit - an evaluation reform to the existing system. Part 11 REforming housing finance: identifying criteria for reform reform for the private sector social sector reforms income-related housing allowances.

Aging population: problems and policy options in the US and Germany

Abstract: Aging population Axel Borsch-Supan The expected change in the age structure of the industrialized countries will lead to a dramatically higher proportion of older people. In Germany, for example, 100 employed persons now support about 40 elderly. By 2030, this ratio will rise to 85 elderly people per 100 employed persons. This process will deeply affect labour, financial and housing markets. It will strain the social security systems, change the accumulation of aggregate wealth and skew its intergenerational distribution, while imposing a growing burden on family support by the young generation when the elderly are becoming frail and unable to live independently. This paper investigates the mechanisms at work in labour, financial and housing markets, drawing systematically on comparisons between German and US institutions to determine the role of taxes, subsidies and regulations. The evidence demonstrates that economic policies have powerful effects; some of them are also currently distortionary and interact with existing market imperfections, so that a serious consideration of policy options which may moderate the implications of population aging is called for.