Clear all

87 results found

reorder grid_view

Tanzania's Fiscal Arrangements: Obstacles to Fiscal Decentralization or Structures of Union-Preserving Federalism?

November 1, 2010

Abstract not available. Working Paper 10-02

Municipal Transfer System in Nicaragua: Evaluation and Proposals for Reform, The (Updated)

February 1, 2008

For almost 20 years, the Nicaraguan authorities have been implementing a fiscal decentralization process to devolve an increasing degree of autonomy to municipalities. As a part of this process, and mainly due to the efforts of the Association of Municipalities of Nicaragua (AMUNIC is the acronym in Spanish), the first municipal transfers were approved in just 1999. Later, the funds available for the municipalities were increased gradually as a percentage of the General Budget (PGR), until in August 2003 the new Law of Municipal Transfers set this percentage at 4% of the total central government tax revenues in 2004, and stated that it should be increased at least by 0,5% per year up to 10% of the PGR in 2010. In 2005 the transfer program corresponded to 5% of the PGR, whereas in the present year the percentage increased to 6%. Working Paper Number 08-01

The Municipal Transfer System in Nicaragua: Evaluation and Proposals for Reform

May 1, 2007

For almost 20 years, the Nicaraguan authorities have been implementing a fiscal decentralization process to devolve an increasing degree of autonomy to municipalities. As a part of this process, and mainly due to the efforts of the Association of Municipalities of Nicaragua (AMUNIC is the acronym in Spanish), the first municipal transfers were approved in just 1999. Later, the funds available for the municipalities were increased gradually as a percentage of the General Budget (PGR), until in August 2003 the new Law of Municipal Transfers set this percentage at 4% of the total central government tax revenues in 2004, and stated that it should be increased at least by 0,5% per year up to 10% of the PGR in 2010. In 2005 the transfer program corresponded to 5% of the PGR, whereas in the present year the percentage increased to 6%. The Law of Municipal Transfers defines five targets for the municipal transfer program: 1) to promote the development of the diverse parts of the national territory; 2) to reduce the imbalance between the capacity to raise revenues and the cost of public service provision at the municipal level; 3) to stimulate local revenue collections and efficiency in municipal management; 4) to make possible the management and implementation of local policies of development and to allow local governments to administer national policies and development programs against poverty; and 5) to contribute to increased transparency in local management. In order to reach these objectives, the Law of Municipal Transfers also establishes four fundamental criteria to compute the amount of municipal transfers: 1) Fiscal Equity, meant to reduce the horizontal imbalances between municipalities; 2) Efficiency (or Fiscal Effort) in the collection of property taxes (IBI), meant to stimulate IBI collections with respect to the potential revenues in each municipality; 3) Population, which responds solely to the number of inhabitants of each municipality; and 4) Execution of transfers, which rewards the full disbursement of capital transfers. According to the Law of Municipal Transfers, Managua is entitled to 2,5% of the transfer fund, whereas 97,5% is distributed among all other municipalities in accordance with the four criteria. Each distribution criterion is weighted equally, and so the 97,5% of the transfer fund is divided by four and the total transfers for each municipality consist of the sum of the transfers received by each criterion. The potential per capita tax revenues, required to assign the transfers by Fiscal Equity has been calculated so far on a historical basis and now the authorities are considering the introduction of a new methodology, the MDPTM, developed and applied by the Boston Institute for Developing Economies (BIDE). The determination of the potential IBI collection, required to assign the transfers by Fiscal Effort, would also depend on this model. Although the MDPTM would constitute a great improvement with respect to the methodology used in the present, it is also a complex model that requires a great deal of information. In any case, even if the application of the MDPTM is feasible in the immediate future, the proposals provided in this report could easily incorporate its estimations. Working Paper Number 07-08

Gender Wage Differentials in Uganda: Evidence from the Uganda National Household Survey

May 1, 2007

This paper investigates the causes of gender wage differentials in Uganda. Given the potential differences in wage setting mechanisms between urban and rural labor markets, we break up the sample between rural and urban sub-samples. We use data from the nationally representative Uganda National Household Survey for 2002-03 (UNHS 2002/03). We employ standard decomposition techniques based on Oaxaca (1973) to decompose the gender wage gap into labor market characteristics and treatment components. The Neumark (1988) decomposition technique is used to address the "index number" problem. Further, self-selection into wage employment is controlled for using the Heckman (1979) two-step sample selection correction technique. Our empirical results suggest that a substantial portion of the gender wage differential results from employer-driven differences in treatment. This is more so in rural areas. Controlling for selection, the unexplained portion of the gender wage gap is between 61 percent and 78 percent in rural areas. In urban areas, the unexplained portion of the gender wage gap is between 41 percent and 68 percent. Further, in urban areas, 24 percent of the gender wage gap is due to nepotism toward males while 22 percent is a result of discrimination against females. In rural areas on the other hand, 68 percent of the gender wage gap is attributed to discrimination against females while only 1 percent is due to nepotism toward males. Working Paper 07-25

Are Errors in Official U.S. Budget Receipts Forecasts Just Noise?

April 1, 2007

Existing evidence suggests that U.S. Government budget receipts forecasts are unbiased and efficient. Our study is an attempt to examine the veracity of these findings. The time series framework employed in this study is distinguished from previous work in three ways. First, we build a model that explicitly admits serial correlation in the residuals by allowing for autoregressive, moving-average, serial correlation. Second, we employ the nonparametric Monte-Carlo bootstrap to free ourselves from reliance on asymptotic distribution theory which is suspect given the short data series available for this study. Third, we control for errors in the macroeconomic and financial assumptions used to produce the U.S. Government's budget forecasts. We find that the U.S. Government's annual, one-year ahead, budget receipts forecasts for fiscal years 1963 through 2003 are biased and inefficient. In addition, we find that these forecasts exhibit serial correlation in their errors and thus do not efficiently exploit all available information. Finally, we find evidence that is consistent with strategic bias that may reflect the political goals of the Administration in power. Working Paper 07-22

Expanding Property Taxation into Previously Untaxed Areas: South African Townships and Tribal Areas

December 1, 2006

Extending the property tax to new areas not previously subject to taxation has created a number of challenges for local governments in South Africa. This is especially true for municipalities that have amalgamated former black local authorities (BLAs) with former white local authorities (WLAs) and for municipalities in rural areas that have large tracts of traditional tribal lands within their boundaries. The purpose of this paper is to look at how the property tax was initially implemented in these newly taxable areas. Working Paper Number 06-47

Credit Expansions and Financial Crises: The Roles of Household and Firm Credit

May 1, 2006

The literature has identified credit expansions to the private sector as an important predictor of financial crises in developing countries. We extend the literature by decomposing credit into credit extended to households and credit extended to firms. We compile a unique disaggregated data set and find evidence that household credit growth and firm credit growth have positive, distinct, and statistically significant effects on the likelihood of banking and currency crises. Furthermore, household credit growth is a particularly important predictor of banking crises in countries with a high propensity to consume. Working Paper 06-55

India's Intergovernmental Transfer System and the Fiscal Condition of the States

April 1, 2006

India's fiscal deficit and steep deterioration in state finances is a source of concern. The literature abounds with references to the combined fiscal deficit of the center and the states currently at over 10 per cent of GDP. During no other eight year period has the debt-GDP ratio rose by more than 10 percentage points where the ratio of outstanding debt to GDP increased from 21 per cent in 1996-97 to 35 per cent in 2004-05 (Budget Estimate). In this paper, we contend that the lack of State fiscal discipline is due in large part to a flawed intergovernmental fiscal system that fosters fiscal profligacy at the state level. Specifically, the States are highly dependent on transfers from the Union Government, which breaks the Wicksellian link between costs and benefits. There is a lack of transparency and accountability in the system because of extensive use of inadequate revenue assignments, lack of sufficient decentralization to local bodies, and a poorly designed intergovernmental transfer system. Finally, the States are operating under soft budget constraints which encourage fiscal profligacy. In this paper, we concentrate our discussion on issues related to the intergovernmental fiscal transfer system. We contend that the high transfer dependency of the states has weakened accountability and fiscal discipline. The transfer system is also very complex and lacks transparency and coordination among the institutions in charge of implementing transfers, which together produce a cycle of distorting incentives. If the fiscal behavior of the States reflects the incentives created by the intergovernmental system, as we contend, then, absent structural reform of the intergovernmental fiscal system that addresses the perverse incentives of the current system, the fiscal trends described above are likely to persist. Although the Twelfth Finance Commission (TFC) has addressed some of the issues related to the intergovernmental fiscal system and soft budget constraint, there is still an urgent need to tackle other issues in the intergovernmental fiscal system that create perverse incentives and soften budget constraints. This emphasizes the need for the State and Union Governments of India to strengthen and accelerate the reform of India's intergovernmental system. Working Paper 06-47

Public Sector Pay and Corruption: Measuring Bribery from Micro Data

February 1, 2006

This study is the first to provide a systematic measure of bribery using micro-level data on reported earnings, household spending and asset holdings. We use the compensating differential framework and the estimated sectoral gap in reported earnings and expenditures to identify the size of unobserved (unofficial) compensation (i.e., bribes) of public sector employees. In the case of Ukraine, we find that public sector employees receive 24-32% less wages than their private sector counterparts. The gap is particularly large at the top of the wage distribution. At the same time, workers in both sectors have essentially identical level of consumer expenditures and asset holdings that unambiguously indicate the presence of non-reported compensation in the public sector. Using the conditions of labor market equilibrium, we develop an aggregate measure of bribery and find that the lower bound estimate of the extent of bribery in Ukraine is between 460 mln and 580 mln U.S. dollars (0.9-1.2% of Ukraine's GDP in 2003). Working Paper 06-05

Cultural Diversity, Discrimination and Economic Outcomes: An Experimental Analysis

December 1, 2005

Economists have paid increasing attention to the role of cultural diversity in explaining the variability of economic outcomes across societies. We develop an experimental framework that complements existing research in this area. We implement the framework with two cultures that coexist in an industrialized society: the Hispanic and Navajo cultures in the southwestern United States. We vary the ethnic mix of our experimental sessions in order to infer the effect of intercultural interactions on economic behavior and outcomes. We control for demographic differences in our subject pools and elicit beliefs directly in order to differentiate between statistical discrimination and preference-based discrimination. We present clear evidence that Hispanic and Navajo subjects behave differently and that their behavior is affected by the ethnic composition of the experimental session. Our experimental framework has the potential to shed much needed light on economic behavior and outcomes in societies of mixed ethnicity, race and religion. Working Paper Number 05-26

Russian Attitudes Toward Paying Taxes -- Before, During, and After the Transition

September 1, 2005

This paper examines citizens' attitudes toward paying taxes -- what is sometimes termed their "tax morale", or the intrinsic motivation to pay taxes -- focusing on the experience of individuals in the Russian Federation. A unique aspect of our analysis is our ability to study tax morale before (1991), during (1995), and shortly after (1999) the transition of the Russian economy from a centrally planned economy to one based on market reliance. Our empirical analysis uses data from the World Values Survey and the European Values Survey. The results show decay in tax morale in the first four years of the transition from 1991 to 1995, and a small recovery in 1999. These results are consistent with the relevance of social norms in tax compliance, where the widespread perception of tax evasion and of a corrupt and inefficient state led initially to a decline of tax morale. However, the results also suggest that the restoration of a higher level of trust in the state, after some progress in the transition to a market economy, positively influenced tax morale. Using disaggregated data for Russian regions, we also find significant regional differences in tax morale, reflecting the degree of trust different regions have toward Moscow's institutions and policies. Working Paper Number 05-18

Taxing Consumption in Jamaica: the GCT and the SCT

December 1, 2004

The GCT and SCT are critically important revenue sources in Jamaica, accounting for 37.4 percent of total revenues in fiscal year 2003/04 (27.7 percent for GCT alone) and an estimated 11.2 percent of GDP (8.3 percent for GCT alone). In this paper we set out in some detail the present structure and administration of the GCT and SCT and evaluate the performance of these taxes from several angles -- as revenue generators, with respect to their distributional effects, and in an international comparison. We end with recommendations for reform. Working Paper Number 04-32.