Iris J. Lav
This article tackles the issue of comprehensive state budget reform. With structural deficits rampant, reform is needed to maintain the current level of programs that states and localities now provide, but cannot support over time with current revenue policies. Recent “reforms” have mainly focused on cutting both spending and taxes. Nonetheless, it is believed that people want their services and will vote to pay for them, if given that option. The article notes that there have been very few successful state tax reforms in recent years. But modernization of tax systems is needed to alleviate structural deficits. Part of the problem is institutional myopia: improved multiyear budgeting can warn policymakers when proposed actions are likely to create budget problems over the long term.
Robert B. Ward
Over the last decade, observers of state and local finances have been alarmed over an emerging picture of long-term, structural imbalances. This article examines the concept of fiscal sustainability in several formulations and explains that it essentially means limiting expenditure commitments to those that can be met by available revenue streams. It investigates why fiscal sustainability in actual practice, however it might be measured in theory, has fallen into disrepair. The usual lineup of budget-busting culprits is next examined, with the proliferation of entitlement programs standing at the head of the line. Over the past four decades, state and local budget increases reflected the strength of the economy during an unprecedented run of prosperity. Meanwhile, the array of entitlement programs that drove spending was increasingly shaped by political, demographic, and institutional forces, each with its own clientele of beneficiaries. That has made adjustments more difficult when revenues do not keep pace with spending patterns.
Edwin Van De Haar
Alfred E. Eckes
This article deals with the administration of trade policy. It examines the individuals, ideas, and institutions that shape the trade regulation process. It focuses on the rules-based global trading system (World Trade Organization) and how the United States and other leading nations implement their obligations. It also provides readers with extensive bibliographical information, so that they can learn more about technical aspects of this broad subject.
Célestin Monga and Justin Yifu Lin
This introductory chapter of the second volume of the Handbook discusses Africa’s changing economic policy and institutional frameworks, and presents the ways forward. It starts with a chronicle of the rise and fall of the main economic strategies adopted by most African countries after independence, and highlights their rationale and shortcomings. It then draws some lessons to be learned from failures and successes, and stresses the inappropriate tendency of African policymakers to take as reference models the most advanced economies and try to replicate their strategies and policies mimetically. It argues that economic policy in developing countries be primarily conceived as an exercise of strategic selection, and concludes by insisting on the need for humility in the quest for relevant knowledge.
Roger Claassen, Joseph Cooper, Cristina Salvioni, and Marcella Veronesi
Although agri-environmental programs have a long history in the United States and the European Union, such programs began to play a larger role in federal farm policies in the 1980s, in part due to greater concern about environmental damage from agricultural production. Both regions rely primarily on a mixture of three types of policy mechanisms to address agri-environmental issues: voluntary incentive-based programs, regulatory programs, and cross-compliance programs. This chapter provides an overview and comparison of EU and US agri-environmental programs. It then reviews what is known about the environmental and land use impacts of these programs. The chapter also discusses US and EU data sources that are key to analysis of agri-environmental programs and their land use impacts.
This article attempts to provide in a succinct way a road map for those wandering into the territory of agricultural policy and trade. It begins with a brief discussion of the linkages between domestic farm policies and trade policies and the implications of those linkages for world markets. The second section deals explicitly with the treatment of agriculture within the GATT and later the WTO, and considers the significance of the current Doha Round for improving trade rules and lowering protection. A third section considers the situation with respect to regional and bilateral trade agreements, where agriculture has been a reluctant player but has over time been influenced significantly by this trend toward regional solutions to trade problems. A final section gives some indication of where the trade policies and trade rules in agriculture may be heading.
Eduardo Pontual Ribeiro, Camila Pires-Alves, and Luis Carlos D. Prado
This chapter presents and analyzes Brazil’s competition policy on merger control and the abuse of market power. Its role as an important Brazilian public policy derives from a combination of three factors: historical evolution, legal framework, and institution building. The chapter provides an analysis of the evolution of its main agency, the Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica, CADE), while focusing on the control of cartels and mergers. The chapter further discusses institution building over the years surrounding the practice of competition law. Current practice and challenges in this are also discussed in the chapter.
Hal Hill and Jayant Menon
This article aims to provide a stand-alone introduction to the Association of Southeast Asian Nations (ASEAN) economies, and traces ASEAN's evolution with a focus on its programs of economic integration. It also evaluates its past performance and, based on this, examines prospects for its future. The article is organized as follows. Section 2 provides an overview of the ten economies and the development of ASEAN as an institution. Section 3 examines ASEAN economic cooperation and integration with reference to merchandise trade, which was the principal focus of initiatives for the first quarter century. Section 4 then investigates a range of “trade plus” measures, including efforts to develop a broader range of closer economic relations both within and beyond the region, against the backdrop of expanded membership, the Asian financial crisis, the rise of China, and rapidly evolving regional commercial architecture. Concluding observations are presented in Section 5.
This article attempts to identify treatments of corruption that draw on characteristics of underdevelopment either as causes or as consequences. There is a very small amount of literature (both empirical and theoretical) on corruption in the Indian context. A primary reason for the lack of empirical work is the unavailability of data: Both parties typically benefit from corruption, and, therefore, neither has an incentive to report it. The article looks at three aspects of government corruption in developing countries, and in India in particular: red tape, rent-seeking, and the abundance of intermediaries (such as middlemen). The article argues that if wasteful red tape is specifically a characteristic of public provision (not private), then provision should be privatized, as suggested by the “efficient corruption” literature. The article emphasizes that there is very little work on intermediation (and the role of intermediaries) in corruption, an analysis of which is necessary to understand the structure of corruption markets, especially in the Indian context.
Assessing State-Level Science and Technology Policies: North Carolina’s Experience with SBIR State Matching Grants
John Hardin, Lukas Brun, and Lauren Lanahan
State government R&D expenditures play a critical role in supporting innovation in the United States. This chapter discusses the growing role of US state governments in supporting R&D activity, paying particular attention to a small business innovation program in North Carolina designed to complement the federal Small Business Innovation Research (SBIR) program. The chapter first provides an overview of the literature on state science and technology policies that encourage innovation, competitiveness, and economic development at the state level. It then reviews complementary federal and state government policies aiming to improve the success rate of the SBIR program, with particular attention to the One North Carolina Small Business Program. It discusses the objectives of the state policy and provides results of a program assessment, which indicate that the state matching program meets the objectives of the policy and provides positive spillover effects to North Carolina’s economy.
Yonatan Ben-Shalom, Robert Moffitt, and John Karl Scholz
This article reviews commercial policies in Australia, examining both long-term trends and recent developments. Australia is fortunate in having time series that are long and of excellent quality. Indeed, they are probably as good as those available in any other country. These enable analysists to track changes in commercial policies in detail and to describe the distribution of the rates of assistance across industries. The review given in this article covers trade in services as well as trade in goods and the international movement of capital and labor, and considers the style of policy-making.
Stéphan Marette and Jutta Roosen
This article traces consumers' reluctance toward new technologies in the food domain and the nature of controversies. It argues that there are economic considerations in discussion of public policy on controversies. This article seeks to address the issues of controversy, the market concerns by such problems, and the reasons that controversies have become so prominent in many food markets. It further clarifies how to approach the question of an optimal policy by studying when a regulator should promote labels compared to other tools such as standards or a ban. This article presents some of the main contributions in both the empirical and theoretical literature, so as to provide economists or policymakers with resources and help to inform their decisions. It then discusses methods of quantifying the welfare impact of a ban or label on the controversial good. It concludes with a discussion of the implications for public policy.
Sadiq Ahmed and Ashutosh Varshney
This article aims to review India's long-term growth experience with a view to understanding the determinants of growth and the underlying political economy. The article looks specifically at the political economy of India's growth transformation from a low-growth environment (pre-1980s) to a rapid growth environment (post-1980s) and asks how sustainable the new transformation is. Following the introduction, the second section looks at the evolution of India's growth, and the third section reviews this growth experience in terms of its affect on employment and poverty. The fourth section briefly reviews the policy framework underlying this growth. The fifth section takes a political approach to understanding the process and politics of policy making in India. This framework is then applied in the next section to explain India's growth transformation. In the seventh section, the article looks at inclusiveness, which is arguably at the heart of the sustainability of economic reforms and long-term growth. Finally, some concluding remarks are provided.
Scott Farrow and Chava Carter
This chapter reviews the basic economic welfare criteria for slot machines, as implemented via benefit-cost analysis. More specifically, it provides a conceptualization of the benefits and costs of slot machines, as well as a scorecard for key elements of a benefit-cost analysis. The chapter also presents several illustrative empirical studies and discusses areas for additional research.
The Russian economy relies on the freight railways to an extraordinary degree. In 2001, after years of debate, the Russian government adopted an ambitious plan to transform this vertically integrated monopoly into a system that would rely more on private investment and competition and less on government ownership and regulation. This chapter examines the state of the industry after ten years of reforms, focusing on competition, tariffs, and private sector participation. Much remains to be decided, in particular the question of whether Russia will move in the direction of one of the three standard models seen in other countries—vertical separation, third-party access, or horizontal separation—or whether it will continue in the direction pursued in Kazakhstan and under discussion in Ukraine—vertical separation, but with locomotives and operations included with the network and competition limited to rolling stock ownership and freight forwarding.
Christian Keuschnigg and Evelyn Ribi
This article offers an overview of how different company decisions are affected by various tax policy instruments when some firms are financially constrained due to agency problems between inside and outside investors. To organize the discussion, the article presents a simple theoretical model of constrained and unconstrained firms with endogenous organizational choice. When the managerial effort of entrepreneurs is not observable, a high success probability of the firm is guaranteed only if insiders keep a large enough financial stake in the firm. Accordingly the company's income that is pledgeable as a repayment to external investors is reduced and limits the amount of external funding that the firm can obtain. This framework of financially constrained firms leads to predictions for the effects of taxes on investment and external financing that are entirely different from the traditional neoclassical model.
This article uses data on the composition of cabinets in the presidential systems of Latin America to show variation in patterns of cabinet stability across the region. First, it reviews the existing literature on different ways to measure political stability, in particular the stability of cabinets, the causes of cabinet instability, and the link between cabinet stability and policymaking. It then provides data on patterns of cabinet stability in Latin America and on its relationship with different aspects of policymaking in the region.