Finance

Financial Performance and Outreach: A Global Analysis of Leading Microbanks

Financial Performance and Outreach: A Global Analysis of Leading Microbanks
Economic Journal, February 2007, Vol. 117, Issue 517, pp. F107-F133

Morduch, J., Cull, R. & Demirguc-Kunt, A.
02/01/2007

Microfinance promises to reduce poverty by employing profit-making banking practices in low-income communities. Many microfinance institutions have secured high loan repayment rates but, so far, relatively few earn profits. We examine why this promise remains unmet. We explore patterns of profitability, loan repayment, and cost reduction with unusually high-quality data on 124 institutions in 49 countries. The evidence shows the possibility of earning profits while serving the poor, but a trade-off emerges between profitability and serving the poorest. Raising fees to very high levels does not ensure greater profitability and the benefits of cost-cutting diminish when serving better-off customers.

Context-Conditional Political Budget Cycles

Context-Conditional Political Budget Cycles
in Oxford Handbook of Comparative Politics, Carles Boix and Susan Stokes, eds, Oxford University Press.

Rose, S. & J. Alt.
01/01/2007

We investigate electorally-induced fluctuations in spending with two questions in mind: "Under what circumstances is it more feasible? Under what circumstances is it more desirable?" Using data on the US states, we find a clear effect of balanced budget laws: states that restrict politicians' ability to issue debt to cover spending shortfalls simply do not exhibit political budget cycles. The probability of re-election also is important: the expected closeness of the upcoming election, measured by moderate levels of gubernatorial job approval, is associated with larger pre-election surges in spending. Low newspaper circulation is also associated with substantially larger budget cycles. Other results (divided government, transparency) did not come out clearly, as they had in some cross-national studies.

Financial development and pathways of growth: State branching and deposit insurance laws in the United States from 1900 to 1940

Financial development and pathways of growth: State branching and deposit insurance laws in the United States from 1900 to 1940
Journal of Law and Economics 50 (2007) 239-272.

Dehejia, R.H. & Lleras-Muney, A.
01/01/2007

This paper studies the effect of state-level banking regulation on financial development and on components of state-level growth in the United States from 1900 to 1940. We use these banking laws to assess the findings of a large recent literature that has argued that financial development contributes to economic growth. We contend that the institutional mechanism leading to financial development is important in determining its consequences and that some types of financial development can even retard economic growth.

For the United States from 1900 to 1940, we argue that the financial expansion induced by expanded bank branching accelerated the mechanization of agriculture and spurred growth in manufacturing. In contrast, financial expansions induced by state deposit insurance had negative consequences for both the agricultural and manufacturing sectors.

Measuring Equity and Adequacy in School Finance

Measuring Equity and Adequacy in School Finance
Handbook of Research in Education Finance and Policy. Edited by Ladd, Helen F. and Ted Fiske. Laurence Erlbaum Associates, New York,

Downes, T. & Stiefel, L.
01/01/2007

The Handbook traces the evolution of the field from its initial focus on school inputs (per pupil expenditures) and the revenue sources (property taxes, state aid programs, etc) used to finance these inputs to a focus on educational outcomes (student achievement) and the larger policies used to achieve them. It shows how the current decision-making context in school finance inevitably interacts with those of governance, accountability, equity, privatization, and other areas of education policy. Because a full understanding of the important contemporary issues requires inputs from a variety of perspectives, the Handbook draws on contributors from a variety of disciplines.

The Armonk Agenda: Next Steps for Fiscal Reform in New York State

The Armonk Agenda: Next Steps for Fiscal Reform in New York State
Citizens Budget Commission, October

Harvey, D., Lynam, E. & Brecher, C.
10/01/2006

On April 7-8, 2006, the Citizens Budget Commission (CBC) convened a conference in Armonk, New York with the goal of identifying widely supported, high-priority measures for fiscal reform in New York State. This document highlights those measures in order to raise awareness and promote discussion of them in the coming year.

Two Wrongs Do Not Make a Right

Two Wrongs Do Not Make a Right
National Tax Journal, Sep 2006, Vol. 59 Issue 3, p491-508, 18p.

Furman, J.
09/01/2006

This paper analyzes proposals to remedy tax-induced distortions in health care by using new tax incentives and retaining all of the existing distortionary tax incentives. In the process of remedying some distortions, this approach magnifies others--most notably increasing the total tax preference for health care. The paper considers two examples--the Bush administration's FY 2007 budget proposal and a plan by Cogan, Hubbard and Kessler (2005)--and shows that both could result in higher health spending and reduced welfare. Finally, the paper discusses the circumstances in which tax incentives could be warranted to remedy market failures in health insurance.

Do Fiscal Rules Dampen the Political Business Cycle?

Do Fiscal Rules Dampen the Political Business Cycle?
Public Choice 128: 407-431.

Rose, S.
08/01/2006

This paper develops and tests the theory that fiscal rules limit politicians' ability to manipulate the budget for electoral gain. Using panel data from the American states, I find evidence suggesting that stringent balanced budget rules dampen the political business cycle. That is, while spending rises before and falls after elections in states that can carry deficits into the next fiscal year, this pattern does not exist in states with strict "no-carry" rules. Neither binding gubernatorial term limits nor the partisan composition of government appear to significantly affect the magnitude of the political business cycle.

Danger Ahead! How to Balance the MTA’s Budget

Danger Ahead! How to Balance the MTA’s Budget
Citizens Budget Commission, June

Brecher, C.
06/01/2006

Despite its essential role in sustaining the New York economy, the MTA is not financed in a consistent or sensible
manner. Specifically, the financing arrangements for the MTA result in:
Problem 1: Repeated operating deficits.
Problem 2: Capital investments insufficient to bring its facilities to a state of good repair.

In order for New York to maintain a strong and vibrant economy, its transportation system has to be kept up to par and expanded to meet future needs. This report examines the two problems and suggests alternative financing policies for the MTA that would balance its operating budget and provide sufficient capital to accelerate the pace at which its facilities are brought to a state of good repair.

The next section describes the vital role of the MTA in transporting people to their jobs in New York's central business district. The following sections explain the MTA's problems identified above, present the CBC's guidelines for funding the MTA services in the future, and estimate the agency's expenditure and revenue requirements under those guidelines. The final section deals with options for meeting revenue requirements by increasing cross subsides from auto users.

Public Authorities in New York State.

Public Authorities in New York State.
Citizens Budget Commission, April

Brecher, C. & Brill, J.
04/01/2006

Public authorities play a major role in delivering public services. They supplement direct government agencies in three ways:

• Provide a business-like organizational structure for public services that are financed primarily by user fees and whose capital investments are self-financed through bonds supported by user fees.
• Provide a stewardship for major capital assets and make long-run investment decisions with some isolation from pressures of the electoral cycle.
• Provide a mechanism for taking advantage of federal tax benefits for economic development and other purposes that otherwise would be treated as private activities.

Authorities are intended to strike a balance between political accountability and political independence. Unlike heads of direct government agencies, governing boards of authorities are expected to be more independent of those who appoint them, to make difficult and unpopular decisions outside the arena of elected politics, and to be accountable to the public indirectly through reporting, transparency in decision-making and long-run performance. New York State makes extensive use of public authorities.

 

 

The Causes of Fiscal Transparency: Evidence from the American States

The Causes of Fiscal Transparency: Evidence from the American States
IMF Staff Papers, Special Issue, Vol. 53, pp. 30-57.

Alt, J.E., Lassen, D.D. & Rose, S.
03/01/2006

We use unique panel data on the evolution of transparent budget procedures in the American states over the past three decades to explore the political and economic determinants of fiscal transparency. Our preliminary results suggest that more equal political competition and power sharing are associated with both greater levels of fiscal transparency and increases in fiscal transparency during the sample period. Political polarization is associated with lower transparency, and past fiscal conditions also appear to affect the level of transparency.

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