SummaryThere is a substantial debate over the direction of the causal relation between income and health. This is important for our understanding of the health production process and for the policy debate over improving healthcare. We instrument income with rainfall measurements by matching satellite information on timing and positioning of 21 rainfall stations to longitudinal data (1991–94) of over 4,000 individuals in 51 villages in Tanzania. A 10% increase in income reduces the number of illnesses by 0.02. We also find that a 10% increase in income implies an increase of about 0.1 vaccinations of children under six.
This article describes the methods used by the Treasury and other government departments for making forecasts of the public finances. A highly detailed approach is required because of the Treasury's budgetary role, but the aggregated results are subjected to careful 'top-down' checks. Forecasts have a necessary role in fiscal policy. But they are subject to large margins of error, and should be presented and used with caution.JEL classification: E6, H1, H6.
This article examines the conduct of fiscal policy since 1974. It is in two parts. The first contains a chronological narrative of what policy-makers did during the period. It describes, in rapid summary, the major policy developments and the setting within which policy formation evolved. The style of part I is more journalistic than scientific, the intention being to convey some sort of impression of what things were like at the time-of the pressure of immediate problems and the unexpectedness of many economic developments-an impression which would perhaps be lost in a more analytical and abstract treatment.The second part is concerned with the more technical task of measuring the effects of policy changes. It emphasizes the leverage of fiscal instruments-the 'first impact' of policy upon the level of demandrather than the more indirect effects on the balance of payments and inflation, important though these may have been as target variables.In short then, in part I we describe the main policy events since 1974 much as they must have seemed to a well-informed observer at the time, In part II we try, with the benefit of hindsight, to assess at a more rigorous and abstract level, what policies really did.
I IKTRODVCTIONIt will be argued in this paper that for policy purposes the measure of inflation-unemployment trade-off provided by the conrentional Phillips curve is inadequate. A n alternative relationship, which we call the "efficient Phillips curve", is suggested to account for the complex concept of the infIatioii-uiieniploynient trade-off. The efficient Pldlips curve takes into account the inter-relationships between inflation and unemployment that arise in blie macroeconomy, the preferences of the policy maker in terms of these two objective variables ( I ' and U ) as well as his choice of the instruments (or the instrument mix) used. The efficient Phillips cnrve is derived using the tlicory of optimal control and, unlike the conventional Phillips curve, i t is based 011 the "e5cient frontier" of the econometric model. The slope of the efficient Phillips curve will of course vary, inter a h , with the structure of the model. I n the present case, two versions of the National Institute's (XIESR, 1979) macroeconometric model ("NIESR model") are dcployed, which differ solely, but crucially, in the form of wage equation that appears in the model. Efficient Phillips curves are first derived analytically for static approximations t o each of the two versions of the N E S R model ; subsequently, numerical derivations are obtained which usc the full dj-naniic rcrsions of the model to compare their policy properties. *Nnnuscript received 10.3.82; 6nnl version received 29.4.82. tFirinncia1 support from the S.S.R.C. is gratefully acknowledged. The author3 would like to thank P. -4reSti9, 11. J. Artis, K. Cuthbertson and B. Rustem for helpful comments on M earlier draft. The usual disclaimer applies. 151
Although it has long been recognised that inflation may have important consequences for the level and distribution of the burden of a progressive personal income tax, it is only with the recent sustained acceleration in the rate of increase of the general price level that these relationships have become matters of serious concern. A number of Western economies, including Iceland (in 1965), the Netherlands (1972) and, most recently, Canada (1974), have introduced schemes for linking the main parameters of the income tax to an index of consumer prices, and considerable interest has been shown in the possibility of a similar reform in this country.
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