International organizations have encouraged national governments to switch from traditional cash-based to businesslike accrual accounting, on the presumption that long-run benefits may outweigh substantial implementation and operating costs. We use a quasi-experimental setting to evaluate whether changing public sector accounting standards is justified. Some local governments in the German federal state of Bavaria introduced accrual accounting while others retained cash-based accounting. Difference-indifferences and event-study results do not show that (capital) expenditures, public debt, voter turnout, or government efficiency developed differently after changes in accounting standards. Operating costs of administration, however, increase under accrual accounting.
This paper investigates how government ideology and globalisation are associated with top income shares in 17 OECD countries over the period 1970 to 2014. We use top income shares of the World Wealth and Income Database (WID). Globalisation is measured by the KOF index of globalisation. Static and dynamic panel model results show that the top income shares increased more under right wing governments than under left wing governments. The ideology‐induced effect was stronger when globalisation proceeded more rapidly. Globalisation was positively correlated with income shares of the upper‐middle class (P99–P90), but negatively with income shares of the rich (top 1%) in the overall sample. We show that the relationship differs between Anglo‐Saxon countries and other OECD countries. Globalisation was more pro‐rich in Anglo‐Saxon countries than in other OECD countries. Government ideology does not turn out to have a statistically significant effect on top income shares in Anglo‐Saxon countries after the 1980s, whereas ideology‐induced differences in the distributional outcomes continued in other OECD countries.
We examine how trade openness influences income inequality within countries. The sample includes 139 countries over the period 1970–2014. We employ predicted openness as instrument to deal with the endogeneity of trade openness. The effect of trade openness on income inequality differs across countries. Trade openness tends to disproportionately benefit the relative income shares of the very poor, but not necessarily all poor, in emerging and developing economies. In most advanced economies, trade openness increased income inequality, an effect that is driven by outliers. Our results suggest a strong effect of trade openness on inequality in China and transition countries.
Several countries use shutdown strategies to contain the spread of the COVID-19 epidemic, at the expense of massive economic costs. While this suggests a conflict between health protection and economic objectives, we examine whether the economically optimal exit strategy can be reconciled with the containment of the epidemic. We use a novel combination of epidemiological and economic simulations for scenario calculations based on empirical evidence from Germany. Our findings suggest that a prudent opening is economically optimal, whereas costs are higher for a more extensive opening process. This rejects the view that there is a conflict with health protection. Instead, it is in the common interest of public health and the economy to relax non-pharmaceutical interventions in a manner that keeps the epidemic under control.
The paper examines how new airport infrastructure influences regional tourism. Identification is based on the conversion of a military airbase into a regional commercial airport in the German state of Bavaria. The new airport opened in 2007 and promotes travelling to the touristic region of Allgäu in the Bavarian Alps. A synthetic control approach is used to show that the new commercial airport increased tourism in the Allgäu region over the period 2008-16. The positive effect is especially pronounced in the county in which the airport is located. The results suggest that new transportation infrastructure promotes regional economic development.
We develop a novel approach integrating epidemiological and economic models that allows data-based simulations during a pandemic. We examine the economically optimal opening strategy that can be reconciled with the containment of a pandemic. The empirical evidence is based on data from Germany during the SARS-CoV-2 pandemic. Our empirical findings reject the view that there is necessarily a conflict between health protection and economic interests and suggest a non-linear U-shape relationship: it is in the interest of public health and the economy to balance non-pharmaceutical interventions in a manner that further reduces the incidence of infections. Our simulations suggest that a prudent strategy that leads to a reproduction number of around 0.75 is economically optimal. Too restrictive policies cause massive economic costs. Conversely, policies that are too loose lead to higher death tolls and higher economic costs in the long run. We suggest this finding as a guide for policy-makers in balancing interests of public health and the economy during a pandemic.
We examine how political institutions influence health expenditure by using a panel of 151 developing and developed countries for the years 2000 to 2015 and four measures of democracy. Our pooled OLS analysis shows that democracies have 20–30% higher government health expenditure relative to GDP than their autocratic counterparts. An instrumental variable approach which exploits the regional diffusion of democracy confirms the positive effect of democracy on government health expenditure. Panel fixed effects and event study models also suggest a positive within-country effect of democratization on government health expenditure within a short period after regime transition. Democratic rule, however, does not turn out to significantly influence private health expenditure compared to autocracies. We conclude that democracies may care more for their citizens and strive to decrease inequalities in the access to health care.
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