Research in Social Sciences and Management

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Organizational Unit

Publications

On the performance of US fiscal forecasts : government vs. private information

Publication . Zidong, An; Jalles, João Tovar

This paper contributes to shed light on the quality and performance of US fiscal forecasts. The first part inspects the causes of official (CBO) fiscal forecasts revisions between 1984 and 2016 that are due to technical, economic or policy reasons. Both individual and cumulative means of forecast errors are relatively close to zero, particularly in the case of expenditures. CBO averages indicate net average downward revenue and expenditure revisions and net average upward deficit revisions. Focusing on the causes of the technical component, we uncover that its revisions are quite unpredictable which casts doubts on inferences about fiscal policy sustainability that rely on point estimates. Comparing official with private-sector (Consensus) forecasts, despite the informational advantages CBO might have, one cannot unequivocally say that one or the other is more accurate. Evidence also seems to suggest that CBO forecasts are consistently heavily biased towards optimism while this is less the case for Consensus forecasts. Not only is the extent of information rigidity is more prevalent in CBO forecasts, but evidence also seems to indicate that Consensus forecasts dominate CBO’s in terms of information content.

2020-05Working paper

Open access

Taxation and public spending efficiency : an international comparison

Publication . Afonso, António; Jalles, João; Venâncio, Ana

This paper evaluates the relevance of the taxation for public spending efficiency in a sample of OECD economies in the period 2003-2017. First, we compute the data envelopment analysis (DEA) scores and the Malmquist productivity index to measure the change in total factor productivity, the change in efficiency and the change in technology. Second, we explain these newly computed public efficiency scores with tax structures using a reduced-form panel data regression specification. Looking at the period between 2007 and 2017, our main findings are as follows: inputs could be theoretically lower by approximately 32-34%; the Malmquist indices show an overall decrease in technology and in TFP. Crucial for policymaking, we find that expenditure efficiency is negatively associated with taxation, more specifically direct and indirect taxes negatively affect government efficiency performance, and the same is true for social security contributions.

2019-05Working paper

Open access

The global value chains and the evolution of chinese economic model

Publication . Ilhéu, Fernanda

According to the Word Bank in the first 38 years of China Economic Reform took 700 million people out poverty line in China at same time benefiting the Global South economy due to the integration of the Transnational Enterprises Global Value Chains with China. Chinese government understood the economic rational of Global Value Chains, Flying Geese Model and Foreign Direct Investment Theories and introduced policies to attract foreign capital, technology, production, and foreign buyers, placing China as the final stage of the production networks in Asia and also transforming China in the biggest buying market of many resources and energy suppliers from less developed countries in Asia, Africa and South America. But a new model of Chinese economic development even more interconnected and interdependent with the world is now on move. Even quite before the world acknowledge the protectionist mindset of the US in Trump era, Chinese President Xi Jinping launched in 2013 a very ambitious initiative under the name of “One Road One Belt the 21st-Century Maritime Silk Road” to enhance a new stage of world globalization, which together with two complimentary initiatives the “International Production Cooperation” and “Third-country Market Cooperation” and in complementarity with the “Made in China 2025” and “Internet Plus” plans will lead China to develop Global Value Chains leaded by Chinese companies and integrating countries of Europe, Africa, Asia, and South America.

2020Working paper

Open access

This changes everything : climate Shocks and sovereign bonds

Publication . Cevik, Serhan; Jalles, João Tovar

Climate change is already a systemic risk to the global economy. While there is a large body of literature documenting economic consequences, there is scarce research on the link between climate change and sovereign risk. This paper investigates the impact of climate change vulnerability and resilience on sovereign bond yields and spreads in 98 countries over the period 1995–2017. We find that the vulnerability and resilience to climate change have a significant impact on the cost government borrowing, after controlling for conventional determinants of sovereign risk. That is, countries that are more resilient to climate change have lower bond yields and spreads relative to countries with greater vulnerability to climate change. Furthermore, partitioning the sample into country groups reveals that the magnitude and statistical significance of these effects are much greater in developing countries with weaker capacity to adapt to and mitigate the consequences of climate change.

2020-05Working paper

Open access

Tax revenue reforms and income distribution in developing countries

Publication . Gupta, Sanjeev; Jalles, João Tovar

We explore the impact of major revenue mobilization episodes on income distribution dynamics using a new “narrative” database of major policy changes in tax and revenue administration systems, covering 45 emerging and low-income countries from 2000 to 2015. Our main finding is that after a tax reform (particularly those affecting the personal income or the operation of the revenue administration), the Gini index falls and the bottom income share rises. This result does not hold for sub-Saharan Africa, calling into question the design of tax reforms implemented in the region (mostly fragile states in the sample). In general, to reduce more rapidly income inequality (and improve the income prospects of the poorest strata of the population), it would be more effective to implement tax reforms when the economy is growing relatively slowly. Finally, the smaller the government and the smaller the tax system, the larger the beneficial impact of tax reforms on income distribution. Our results are robust to a battery of sensitivity and robustness tests.

2020-07Working paper

Open access