Monetary policy and regional economic performance in Mexico: A structural panel VAR approach

The aim of this article is to investigate the dynamic effects of monetary policy shocks on economic activity and aggregate price levels across Mexican states. To do this, a recursive structural panel VAR model is implemented as proposed by Pedroni which allows for regional heterogeneity and structural identifying restrictions of common monetary policy shocks. Empirical evidence suggests a common monetary policy shock to short‐term interest rates induces significant cross‐state variation in prices and output level responses. Additional analysis indicates that structural features, such as the industry mix and the small versus large firm mix, are possible sources of the observed cross‐state variation influenced by interest rates and credit channels. We conclude that the observed differentiated regional impacts are sufficiently important to justify rethinking Mexico's current monetary policy framework in order to explicitly consider a regional view.     

The State‐Level Impacts of Enforcing Sales Taxes for E‐retail Purchases

The Marketplace Fairness Act (S. 743) recently passed by the U.S. Senate may portend a national move toward states imposing sales taxes for business‐to‐consumer e‐retail purchases. While much of the policy debate surrounding this question has focused on trade creation versus diversion, there are likely distinct compositional effects at the state level, which will affect both economic activity and tax revenue. Consumers are clearly hurt by an online sales tax. However, such a policy would seemingly benefit state tax coffers, as well as traditional brick‐and‐mortar retailers and their employees. This paper uses a computable general equilibrium model approach to get a better understanding of the state‐level income, employment, and tax revenue effects of such a policy shift, in particular the likely tradeoffs between these three traditional economic targets across reasonable ranges of price elasticities.     

An Application of the Stock Adjustment Model in Estimating Employment Multipliers for the South Central Louisiana Petroleum Economy 1964–84

The South Central Louisiana Petroleum Economy received an economic rent from its petroleum resources during the energy crisis of the 1970s and early 80s. A differential export-base model incorporating a geometric lag was developed for estimating dynamic employment multipliers. This technique is especially applicable to regional economies in which exports are a major economic factor. Employment multipliers were estimated using ordinary least squares (OLS) regression. Results from the analysis indicate that agriculture, oil and gas mining, and manufacturing are highly significant employment generators. Both long-run and short-run employment multipliers were derived from the model. It is estimated that a five-dollar change in the real price of crude oil will result in a long-run employment change of 8,027 for the oil and gas mining industry. Based on estimates of the long-run multiplier, this will result in a total employment change of 28,014 for this economy.     

State Fiscal Structure and Economic Development Policy

This essay adds a new dimension to the debate concerning taxes and business location decisions by raising a simple, but perhaps underappreciated point concerning political implications of state and local fiscal structure for state economic development policy. Low taxes may well be attractive to business owners and their employees; however, a fiscal structure that is not incentive-compatible with economic expansion may end up frustrating public policies of all types aimed at promoting growth. Economic growth may be seen as increasing types aimed at promoting growth. Economic growth may be seen as increasing demands for public services, thereby placing upward pressure on tax rates faced by the original taxpayers. In Wyoming, this problem is compounded because the tax base is narrow and highly income inelastic and the incidence of taxes levied falls significantly on out-of-state residents who do not benefit from public services provided. Additionally, prospects for reducing the mismatch between taxpayers and public service beneficiaries appear to be limited because, quite understandably, state residents do not wish to pay more for public services for which they have historically paid cents on the dollar.     

Tax Incentives in an Economy with Public Goods

This study employs a dynamic computable general equilibrium (CGE) model of Ohio to evaluate the effect of a state corporate tax cut. The innovative features of this study are (1) the use of the cost of capital concept, (2) dynamic adjustment mechanisms in factor markets, and (3) incorporation of public goods in the household utility function and firms' production functions. The model results indicate that the stimulatory effects of tax cuts for economic development are muted when effects of public expenditures on the productivity of private capital and the migration of households are taken into account. This is because the reduction in public expenditure due to the tax cut implies (1) lower productivity for private industries and (2) lower levels of labor in-migration during the initial several periods after the policy shock as compared to the pre-policy sequence of equilibria. This study shows that evaluation of tax policy without simultaneously considering the effect of public goods can be misleading.     

Can State Tax Policy Increase Economic Activity and Reduce Inequality?

Previous research shows that when changes in national commodity and income tax rates affect labor supply decisions differently, relative rates can be altered to increase welfare. In the U.S., 40 states impose both a sales and income tax; however, the reliance varies widely. This paper uses a computable general equilibrium model to examine tax policy changes in Colorado. The findings suggest that the revenue neutral changes to income and sales tax rates can affect both the level of economic activity and the distribution of income. When labor force participation is highly sensitive to income tax rate changes—which this paper suggests is the case—progressive changes to Colorado's tax policy changes can both reduce inequality and increase output and employment.     

Tax enforcement interactions among Chinese provinces: A frontier and spatial analysis

Spatial interactions in tax policy have been examined intensively for developed countries. This study presents new evidence of tax enforcement interactions from a developing country. A trend of intensified enforcement on the corporate income tax (CIT) over time is identified among Chinese provinces. Additionally, stringent CIT enforcement in neighboring provinces enhances CIT enforcement in the surrounded province. Furthermore, tax enforcement interactions involve both the state and local tax authorities. The findings not only help to understand the Chinese “regionally decentralized authoritarian system,” but also echo second‐generation fiscal federalism that highlights the role of institutional incentives in shaping intergovernmental fiscal relations.     

Life Sciences and Human Capital: Jobless Growth on Specialised and Local Labour Markets?

Policy makers and scholars often regard the life science industry in general, and bio‐technology in particular, as an engine of future economic growth. The expectation is that growth in the industry will ultimately provide a major boost to national employment numbers. However, in this paper, I find that the Swedish life science industry (encompassing pharmaceutical, bio‐technology, and medical technology firms) accounts for only a small proportion of total employment in Sweden. Given the recent discussion on jobless growth (i.e., economic growth without employment growth), it is here argued that focusing on employment is not necessarily the best policy approach to assessing the impacts of the life science industry on the overall economy. This paper maps and analyses the scope, structure, and geography of the life science industry and its workforce in Sweden using a unique set of data covering approximately 1,200 firms and 53,000 employees. The industry's workforce has education and income levels significantly higher than national averages, and is heavily concentrated in larger metropolitan areas and major university cities. Despite employing relatively few people and being more or less dependent on the existence and success of a few major pharmaceutical firms, the industry may still have a significant impact on the national economy by engendering high levels of education, income, and export revenues, particularly in specific regions.     

北京市发展农产品加工业的思路与对策选择

农产品加工业的发展,是北京市实现城乡经济统筹发展、构建社会主义和谐社会首善之区目标的必然选择。北京市发展农产品加工业要以实现城乡统筹发展、保障首都市场供应、带动劳动力就业、增加农民收入、提供农业综合效益为目标;政府通过出台财政支持、税收优惠、信贷优惠、公共服务及市场服务等支持政策扶持,引导农产品加工业的发展。一方面,促进农产品加工企业在郊区集聚,以获得规模经济和范围经济;另一方面,促进食品加工等重点行业的加快发展,以获最大化经济和社会效益。     

A Regional Comparative Static CGE Analysis of Subsidized Child Care

ABSTRACT Concerns with the equity of societal income distribution typically underpin the provision of government subsidies to low‐income households, in which such subsidies are commonly believed to reduce economic growth. Using a regional computable general equilibrium (CGE) model, this study examines the equity and growth aspects of subsidizing formal child care services for low‐income households at the state level. The results suggest that state government subsidization of formal child care services does not necessarily reduce the level of economic activity, even when accounting for negative growth effects of tax increases required to finance the subsidies. The CGE model also reveals economic impacts on households and industry sectors not directly affected by the subsidies, impacts that would be omitted from a partial equilibrium microeconometric appraisal.     

Something New or More of the Same in the Bidding Wars for Big Business?

The economic downturn that began in 2007–2008 was blamed by some commentators on neoliberalism and pro‐business policies. So we might expect U.S. state and local governments to have responded with policy changes affecting their neoliberal economic development strategies. Based on this assumption, this paper is a theoretically informed examination of recent high‐profile bidding wars in Wisconsin. The highest profile example was in 2009 when General Motors chose a plant in Michigan over Wisconsin and Tennessee for a new small car line. Wisconsin's Commerce Secretary characterized Michigan's $1.2 billion incentive offer as “absolutely crazy” (compared with his state's $409 million offer!). My main research question is how have Wisconsin state and local governments adjusted their neoliberal economic development efforts in these bidding wars given the recent economic downturn and weak economy? This paper uses the largest incentive offers in Wisconsin during the tenure of the current and previous state governors within the context of ten themes drawn from the literature to problematize the neoliberal policy of bidding for big business. It concludes by considering the implications for economic development policies.     

Estimating the economic impacts of elderly migration: an input-output analysis

"This paper quantifies...the economic impacts of elderly in-migration on the output, earnings, and employment of a receiving state's economy. Data from the Consumer Expenditure Survey and estimates of the total redistribution of income to Florida resulting from elderly in-migration are used to calculate the direct effects by industry. A model for the state of Florida based on the Regional Input-Output Modeling System (RIMS II) is used to estimate the total impacts. The large migration flows and the considerable economic resources of the elderly lead to large, positive total impacts on the Florida economy."     

Interregional Fiscal Accounting

ABSTRACT Fiscal devolution fiom federal to state jurisdictions gives states more authority but also more responsibility for redistributing and stabilizing income. Both the revenue and expenditure sides of a state's budget are affected. This paper describes a social accounting matrix approach to documenting multi-regional, multi-jurisdiction fiscal accounts, called a fiscal SAM. Two of the many potential uses of a fiscal SAM are demonstrated. First, a fiscal SAM of rural, urban, and metro areas of Iowa is used directly to describe and compare the benchmark net fiscal situations of interdependent regions. Second, it is used to analyze the impacts of an economic downturn under a block-grant welfare system. Substate regions are relatively more specialized than state or national economies. Thus, for example, shocks to agriculture will directly affect agriculture-dependent counties more than other types of counties. Substate regions are also more interdependent than states, as well as more open than the nation as a whole. This means that indirect and spatial spillover effects of fiscal and other exogenous changes can be surprisingly large between counties. Here, analysis of fhe multipliers highlights the relative intensities of within and across-region effects of changes in the form of intergovernmental transfers. The multiplier simulation estimates the relative impacts and spillover effects of economic shocks under the new regime.     

Did incentives help municipalities recover from the Great Recession? Evidence from Midwestern cities

This study assesses the impacts of local business incentives in the largest urban areas of Illinois, Michigan, and Wisconsin, three Midwestern states that share similar histories and settings. We assembled a unique dataset combining information on two types of incentives, tax increment financing districts and tax abatements, together with socio‐economic, geographic, fiscal, and spatial competitive characteristics for all of the municipalities in six metropolitan areas. The outcome measures include employment growth, establishment formation, and business relocation. The analysis extends knowledge of the effects of economic development incentives in two ways. First, we improve upon previous research by incorporating key factors in municipal decisions to offer incentives. Second, we add to limited empirical evidence concerning local incentives following the Great Recession. Variation in the use of incentives reflects not only local decision‐making but also differing fiscal capacities and situations of adaptation to adverse economic conditions, with some governments pulling back on incentives and others initiating new approaches to retain or lure businesses.     

Linking Policy and Outcomes: A Simulation Model of Poverty Incidence

ABSTRACT Many states are striving to meet public demand for accountability by “benchmarking”—setting social goals for the state and tracking progress in meeting the goals. However, states are finding it difficult to set realistic targets and to assess the impacts of policy on achievement of the targets without a framework that models the relationships among policy targets, policy actions and social and economic forces outside the control of policymakers. This paper develops a dynamic simulation model of one “benchmark” (poverty incidence) in Oregon, linking transitions into and out of poverty to various events (increased earnings, or having a child as a teenager, for example), and linking these events to policy. The simulation results suggest that, with current policies, Oregon will come close to achieving its poverty benchmark target of 11 percent by the year 2000 if economic conditions remain favorable. The model is used to examine the impact on poverty incidence of three policy strategies: reducing high school dropout and teen pregnancy rates, increasing the effectiveness of social support programs to JOBS participants, and boosting job growth. The simulation results suggest that when assessing the state's performance or “grading” the observed trend in the poverty benchmark, policymakers should take into account the performance of the state (and national) economy. The impact of policy efforts to reduce poverty is limited because many poverty spells are caused largely by events not affected by current state policies.     

The Arts and Employment: A Case Study of the Stratford Festival

This paper examines the impact of the Stratford Festival on employment within the community of Stratford, Ontario. The specific objective is to calculate the number of “secondary” jobs created in Stratford per “primary” job generated at the festival. This is achieved in three stages. First, primary employment is calculated from information provided by theatre personnel. Second, secondary employment is assessed from information collected in a survey of local business proprietors. Third, a festival-employment multiplier is derived. This reveals the number of secondary jobs created in the community per job at the festival. Results indicate that 1.6 jobs result in Stratford for every job generated at the theatre. This finding provides evidence that cultural organizations contribute positively to the economic climate of a community. The economic consequences of cultural events constitute an important argument for their continued support.     

An Evaluation of State Budget Stabilization Funds Among Midwestern States

Using data from the National Conference of State Legislatures, this paper examines the state budget stabilization funds of Indiana, Iowa, Missouri, Michigan, Minnesota, Ohio, and Wisconsin. Unlike previous research, this paper examines the movement of the fund balances over time (between 1983 and 1991), to see how the fund balances move in relation to a number of indicators of state fiscal health. The results of this research show that the use of these funds varies significantly among the states as does the level of funding and therefore the ability of the funds to serve as an effective tool for counter-cyclical state fiscal policy.     

Regional Development Within National Industrial Policies: An Analysis of the British Coal Industry

Three variations in regional policy distinguish the conduct of the nationalized British coal industry—social industry, state industry, and state commerce. Each variation takes a distinct approach to natural and human resource development in chronically depressed regions such as the peripheral coal fields in Britain or the Appalachian coal fields in the United States. Central to the variation are recognition of the factor of decline that E. F. Schumacher analyzed in the 1950s and the mitigation of social welfare consequences of shifts in production and investment. Schumacher's analysis raised policy issues of social welfare, resource development, and energy. These emerged again in the British coalminers'strike of 1984–85. Broad issues like these are likely to surface in regions where employment is concentrated in a declining industry facing new and severe competition.     

Commercialization decisions and the economics of introduction

Summary A commercial horticultural industry that establishes plant-breeding nurseries for an exotic species throughout a regional economy will expand until the marginal profit of the last nursery established is zero. However, a regional government concerned with social welfare will take into account not only the profits of the horticultural industry but also any expected costs of an accidental invasion. The latter costs will consist of the discounted expected social damages due to an increase in the rate of invasion over time and the increase in expected damage cost per hectare caused by an additional nursery. A government can employ an “introducers' pay” tax equal to the latter social costs to ensure that the plant breeding industry establishes the optimal number of nurseries. We illustrate this outcome with the example of purple loosestrife (Lythrum salicaria) in North America. In the absence of any tax, the horticultural industry will establish n = 3528 nursery operations, and the expected damages from invasion are US$ 28.2 million per year. With the tax, only n = 300 nurseries are established but the expected damages from invasion are reduced to US$ 1.3 million per year. Although profits for the horticultural industry are lower from the tax, the net gains in overall social welfare more than offset the losses. Although these results are illustrative only, they show that the problem of plant invasives initiated by commercial operations is amenable to standard economic analysis and solutions, such as implementation of an “introducers' pay tax”.     

Solving the Problems of Economic Development Incentives

ABSTRACT This paper reviews the research literature relevant to economic development incentives provided by state and local governments, and recommends reforms in these incentives. I argue that the main problem with current incentive policies is that state and local governments often provide incentives that are not in the best interest of that state or local area, for example that are excessively costly per job created, or that provide jobs that do not improve the job opportunities of local residents. I suggest that reforms should be “bottom‐up” rather than “top‐down.” Regulation of incentives by the federal government may prevent both desirable and undesirable incentives. “Bottom‐up” reforms would include more information on incentive offers, a budget constraint on the volume of incentives, stronger standards for job quality and job accessibility for the local unemployed, and better benefit‐cost analyses of incentives.