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Article
Publication date: 27 February 2007

Neelesh Gounder, Paresh Kumar Narayan and Arti Prasad

Understanding the relationship between government revenue and government expenditure is important from a policy point of view, especially for a country like Fiji, which is…

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Abstract

Purpose

Understanding the relationship between government revenue and government expenditure is important from a policy point of view, especially for a country like Fiji, which is suffering from persistent budget deficits. The aim of this paper is to investigate the relationship between government revenue and expenditure for Fiji.

Design/methodology/approach

The Johansen test for cointegration and Granger causality test are used to conduct the empirical analysis.

Findings

The key findings are that: government revenue and government expenditure in both the aggregate and disaggregate sense are cointegrated; in the short‐run government expenditure Granger causes government revenue in an aggregate sense, departmental expenditure Granger causes aggregate revenue, and there is bidirectional causality running between government expenditure and customs duties; and in the long‐run there is evidence of fiscal synchronization, implying that expenditure decisions are not made in isolation from revenue decisions.

Research limitations/implications

This fiscal synchronization has not been able curb the current account deficit in Fiji. Moreover, the confirmation of the spend‐tax attitude of the government does not bode well for the level of investments and skilled human capital in Fiji as this may perpetuate tax increases in the future. Given that the Fiji Government is currently trying to rein in the escalating level of fiscal deficit, it is an opportune time for them to engage in extensive expenditure reforms.

Originality/value

The findings of this paper should allow policy makers to make informed decisions. Furthermore, the paper is different from others because apart from examining the revenue and expenditure in an aggregate sense, it also considers the different components of revenue and expenditure.

Details

International Journal of Social Economics, vol. 34 no. 3
Type: Research Article
ISSN: 0306-8293

Keywords

Article
Publication date: 1 March 2007

Steven Deller, Craig Maher and Victor Lledo

Predictive models of government spending behavior based solely on the median voter theory have demonstrated limited utility, particularly when intergovernmental grants are…

Abstract

Predictive models of government spending behavior based solely on the median voter theory have demonstrated limited utility, particularly when intergovernmental grants are involved. Since the 1970s, research on the impact of intergovernmental grants and aids on recipient governments has demonstrated that spending increases greater than predicted by the median voter theory, a.k.a. the “flypaper effect.” One of the challenges facing those trying to empirically test for the flypaper effect is the limited availability of unconditional grants. This study attempts to fill that void in the literature by testing the relationship between spending in 581 Wisconsin cities and villages and state aid receipts through its Shared Revenue program. The findings are generally consistent with previous studies of the flypaper effect, meaning that recipient governments spend more than would be predicted by the median voter theory. As such, the authors suggest that pure economic theories of government spending are limited and that political and institutional factors need to be given greater consideration.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 19 no. 2
Type: Research Article
ISSN: 1096-3367

Article
Publication date: 1 March 2004

Hannarong Shamsub and Joseph B. Akoto

In the past two decades, much of the literature in the area of government financial management has been devoted to studying the causes of fiscal stress. Most studies emphasized…

Abstract

In the past two decades, much of the literature in the area of government financial management has been devoted to studying the causes of fiscal stress. Most studies emphasized the role of such factors as economic cycles, business relocation and factors beyond the control of policy makers as major causes of fiscal stress. This study extends the scope of the research in this area to investigate whether state and local fiscal structures contribute to fiscal stress. Using a pooled cross-sectional time-series approach with the state-local data ranging from 1982 to 1997, the result shows that: there is more significant difference in the composition of tax structures than that of total revenue; high aggregate spending is associated with high fiscal stress; state and local governments over-commit on the social welfare category; local revenue diversification is associated with low fiscal stress; and fiscal decentralization or high spending responsibility assumed by local governments is associated with low fiscal stress. The findings suggest that local revenue diversification and fiscal decentralization can be used as measures to reduce fiscal stress.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 16 no. 1
Type: Research Article
ISSN: 1096-3367

Open Access
Article
Publication date: 15 August 2022

Shengfeng Lu, Sixia Chen, Yongtao Cang and Ziyao San

This study examines whether and how government fiscal pressure influences corporate charitable giving (CCG).

Abstract

Purpose

This study examines whether and how government fiscal pressure influences corporate charitable giving (CCG).

Design/methodology/approach

The authors exploit sub-national tax revenue sharing changes as exogenous variations to government’s fiscal pressure at the city level and then construct a quasi difference-in-differences (DiD) model to conduct the analysis based on a sample that consists of 14,168 firm-year observations in China during the period of 2003 to 2012.

Findings

The authors found that firms increase charitable donations when local governments face higher fiscal pressure. Such effects are more pronounced for firms that have stronger demand for political connectedness in the sample period. Furthermore, this study’s findings suggest that the timing strategy of donating helps firms to lower the effective tax rate and to build stronger political connections. In addition, donating firms outperform non-donating firms in terms of bank loan access and market reputation.

Originality/value

The authors contribute to at least three lines of literature: first, extend the understanding of timing strategies of corporate charitable behaviors; second, contribute to the literature studying the “crowd out” effect between government-provided charitable funds and private donations; finally, contribute to the emerging literature exploring the financial interests associated with corporate donation strategy (Claessens et al., 2008; Cull et al., 2015).

Details

China Accounting and Finance Review, vol. 25 no. 2
Type: Research Article
ISSN: 1029-807X

Keywords

Article
Publication date: 1 March 2015

Whitney B. Afonso

The relationship between the local option sales tax (LOST) and property taxes and own source revenue is not well documented in the literature. This may be due in part to the…

Abstract

The relationship between the local option sales tax (LOST) and property taxes and own source revenue is not well documented in the literature. This may be due in part to the aggregated nature of the data, which fails to capture different motivations for adoption of LOSTs. Using county-level data from 35 states, this study finds that LOSTs increase own source revenue and in some circumstances decrease property tax burdens. The primary contribution of this research is that it uses a policy variable, the LOST rate, to distinguish between the two types of counties that use their LOST revenues differently. This research represents the first step in bridging the gap between the LOST literature and the tax mix choice literature.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 27 no. 3
Type: Research Article
ISSN: 1096-3367

Article
Publication date: 1 March 2003

John R. Bartle, Carol Ebdon and Dale Krane

Local governments in the U.S. rely less on the property tax than they have historically. This long-term trend has been accompanied by important shifts in the composition of local…

Abstract

Local governments in the U.S. rely less on the property tax than they have historically. This long-term trend has been accompanied by important shifts in the composition of local revenues. While the property tax still serves as one primary source of local government revenue, increasingly other sources are used to pay for local government. This paper first examines that trend, the forces behind it, and its regional impact. We then explore trends in three central states - - Iowa, Nebraska, and Arkansas -- that have experienced substantial revenue shifts in recent years. A concluding section discusses the options for the future.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 15 no. 4
Type: Research Article
ISSN: 1096-3367

Article
Publication date: 1 March 2004

Marc Holzer and Mengzhong Zhang

To adjust the fiscal relationship between the central government and the local government, especially to increase the two ratios of (1) central fiscal revenue over GDP and (2…

Abstract

To adjust the fiscal relationship between the central government and the local government, especially to increase the two ratios of (1) central fiscal revenue over GDP and (2) central fiscal revenue over government revenue, China conducted a 1994 fiscal reform effort, the result of which is, at best, mixed. One of the failures to boost the first ratio is the existence of largescale extra budget funds (EBFs) and extra-extra budgetary funds (EEBFs). This paper explores the history, the problems and the causal relations associated with the EBFs under the broad background of China’s fiscal reform and administrative reform. This paper then proposes a comprehensive package for the solution of problems related to the EBFs.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 16 no. 1
Type: Research Article
ISSN: 1096-3367

Article
Publication date: 14 December 2021

Hongyu Jin, Shijing Liu, Jun Li and Chunlu Liu

Considering there is a lack of research in determining the optimal levels of government guarantee and revenue cap, the objective of this research is to determine their optimal…

Abstract

Purpose

Considering there is a lack of research in determining the optimal levels of government guarantee and revenue cap, the objective of this research is to determine their optimal levels to achieve a reasonable financial risk allocation between governments and private investors while avoiding overly lucrative conditions for private investors.

Design/methodology/approach

Expanded net present value (NPV) analysis and bargaining game theory are employed to construct the core of the determination process. The risk gap between governments and private investors is assessed via an expanded NPV analysis to see if the financial risk has been shared reasonably, based on which the range of the government guarantee is decided. A bargaining model is then created to help locate the optimal level of the government guarantee. Finally, a revenue cap, often combined with the government guarantee in public–private partnership (PPP) agreements, will be determined if overly lucrative conditions for private investors are observed or governments suffer a risk spillover.

Findings

Referring to a real PPP project in Australia, Project BA is created to validate the applicability of the proposed determination process. The outcome shows that the proposed determination process in this paper is capable of determining the optimal levels of government guarantee and revenue cap. The government preferences towards risk allocation will influence the values of the optimal levels. Governments may also consider to alleviate the control over investors' net profits to mobilise private investors into PPP projects.

Research limitations/implications

There is a potential possibility that the revenue cap fails to control the financial risk for governments or the overly lucrative condition for private investors. In other words, even though the revenue cap is set at the minimal level, the financial risk for governments still beyond their tolerance range or the overly lucrative condition for private investors still occurs. Future research may focus on other financial protective schemes which help to better control the financial risks for governments and profits for private investors.

Originality/value

Government guarantees are frequently used as an investment incentive to reduce the probabilities of suffering loss for private investors. Nevertheless, the financial risks for governments may increase after providing guarantees and, as a result, revenue cap is required by governments to avoid placing themselves in an unprotected situation. By recognising the importance of the two contractual parameters, many scholars dig into their option values. However, there are very rare research works focussing on the method of determining the specific levels of government guarantee and revenue cap. To overcome the limitations of existing models and enrich the methodology for government guarantee and revenue cap determination, this paper contributes to the body of knowledge by developing a government guarantee and revenue cap determination process which contributes to a reasonable allocation of financial risks between governments and private investors.

Details

Engineering, Construction and Architectural Management, vol. 30 no. 2
Type: Research Article
ISSN: 0969-9988

Keywords

Article
Publication date: 1 March 2006

Mengzhong Zhang

To boost the fiscal revenue, i.e., government revenue over GDP and central government revenue over government total revenue, China conducted the 1994 fiscal reforms. According to…

Abstract

To boost the fiscal revenue, i.e., government revenue over GDP and central government revenue over government total revenue, China conducted the 1994 fiscal reforms. According to some observers, the results of the initial reforms were mixed. This study reveals, contrary to most examinations of previous studies, the 1994 fiscal reforms have been an enormous success in achieving the original policy purposes, although remaining problems still present a daunting task for the Chinese government. This paper examines the factors triggering the 1994 fiscal reforms, reveals the contents and accomplishments of the reforms, explores unfinished tasks and ultimately proposes some policy implications.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 18 no. 4
Type: Research Article
ISSN: 1096-3367

Article
Publication date: 11 January 2024

Christine R. Martell

Inflation and federal monetary efforts to control it with interest rate hikes have very real and overwhelmingly negative consequences on US local governments following the onset…

Abstract

Purpose

Inflation and federal monetary efforts to control it with interest rate hikes have very real and overwhelmingly negative consequences on US local governments following the onset of COVID-19. This study explores the post-pandemic inflationary environment of US local governments; examines the impacts of inflation and high interest rates on local government revenue, operating costs, capital costs, and debt service; reviews local government inflation management strategies, including the use of intergovernmental revenue; and assesses ongoing threats to local government financial health and financial resilience.

Design/methodology/approach

This study uses trend and literature analysis to comment on current issues local governments face.

Findings

The study finds that the growth of property values and resulting stability of property tax revenue has been important to local government revenues; that local governments bear very real burdens as operating and capital costs increase; and that the combination of high inflation and interest rates affects local government debt issuance by negatively affecting credit quality and interest costs, leading to municipal market contraction. Local governments have benefitted tremendously from intergovernmental revenue, but would be ill-advised to rely on it.

Practical implications

Vulnerabilities owing from revenue mismatch with the economy; inadequate affordable housing, inequality, and social issues; a changing workforce and tight labor market; climate change; and federal fiscal contraction—all of which are exacerbated by high inflation and interest rates—require local governments to act strategically, boldly and collaboratively to achieve fiscal health and financial resilience, and to realize positive returns of investments in people and capital.

Originality/value

This work is unique in addressing the post-pandemic impact of inflation and interest rates on local governments.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1096-3367

Keywords

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