Viewing 10 posts categorized under Public Finance

Credit access and market access: the SME-Leader program

June 25, 2024

This paper shows that credit access is a key barrier to exporting. It focuses on the implementation of a unique credit guarantee scheme for SMEs (Small and Medium Enterprises) in Portugal between 2008 and 2014 — the SME-Leader program (programa PME-Líder). By exploiting firm eligibility for this scheme, the paper establishes a causal impact of access to finance on firm export dynamics. The paper finds that access to the credit guarantee and subsequent access to credit sharply increase the probability of exporting: qualifying firms were approximately 12% more likely to export than similar non-qualifying firms.

Multinationals and services imports from havens: when policies stand in the way of tax planning

March 16, 2023

Multinational groups have been in the spotlight because of their activities that shift profits to tax havens, allowing them to minimize corporate tax bills in high-tax countries. The literature has documented several strategies used by multinationals to shift profits. This paper studies one strategy for which systematic empirical evidence is relatively scarce: the use of intra-group services transactions. Under this route, the firms of the group located in high-tax countries may artificially inflate their costs by paying expensive fees for services (e.

Economic austerity and the political environment

July 27, 2022

Anti-establishment and EU-skeptic parties have gained significant support since the Great Recession and the subsequent European Sovereign Debt Crisis. Higher vote shares for these parties have increased partisan conflict and led to more fragmented parliaments. Interestingly, the rise in support for extreme parties occurred during a period of significant fiscal policy interventions. In particular, several European countries, such as Portugal, have implemented large-scale fiscal consolidation measures to reduce high levels of public debt, thereby averting the risk of sovereign default.

Lame duck politicians and fiscal policy

February 3, 2022

Does the introduction of term limits affect policymaking? Elections have a salutary disciplining effect as long as they urge politicians to act on behalf of the electorate. If politicians place too high a value on holding office, consequences may yet be pernicious. To boost their probability of re-election, politicians may end up favoring policies that are popular among voters instead of those they would otherwise promote. Once ineligible, they have fewer incentives to please the electorate.

Political cycles in municipal revenue forecasts

January 27, 2022

Recent studies suggest that governments use overly optimistic revenue forecasts to expand their fiscal room for maneuver in election years in order to increase their chances of re-election. This paper starts by providing a theory for this observation that is based on the assumption that uninformed voters mistake the fiscal activity of the government for competence. As a result, the budget is expanded in election years, but cut in off-election years.

Who should you vote for? Or, what makes a good mayor?

September 14, 2021

According to a survey ran by the Portuguese Electoral Behavior Project after the local elections in 2001 and 2005, around 50% of the Portuguese inquired voted for the party they preferred and did not take into account other characteristics of its head candidate. Bourdain (2008) explains that these electors voted for the party of preference and not the head candidate because they believed that being a representative of a given political party is the most important characteristic of a politician for policy outcomes.

Time overruns in public projects

March 31, 2021

Public projects tend to be perceived as having substantial cost and time deviations and overruns, i.e., with project final cost higher than forecasted and with project completion after the forecasted deadline. This paper studies the causes for such deviations from forecasts. It focuses on project-related (endogenous) reasons such as the investment amount and the sector of investment, and on (exogenous) reasons of political, legal, regulatory, and economic nature that include a dummy for government majority, a variable indicating the political leaning of the government, a dummy for the new procurement law of 2008, the rule of law and the corruption index, and GDP growth, inflation, along with dummy variables for the financial crisis and the intervention of the Troika.

Was local government efficiency affected by the Troika’s intervention in Portugal?

December 1, 2020

A decentralization process is underway in Portugal with the increased attribution of competencies to local governments hoping to benefit from efficiency gains. However, during the Troika intervention, the austerity measures adopted by the Portuguese government impacted the functioning of local administrations. This paper studies the efficiency in local governments and its drivers and provides empirical evidence about the impact of Troika’s intervention on the Portuguese municipalities. The paper evaluates the efficiency of the 278 mainland municipalities by relating the cost of providing public services to the quantity of services provided.

The impact of international migration on the Portuguese public pension system: a scenario analysis

September 27, 2019

Migration might constitute one possible pathway to mitigating the effects of the aging population on the financial stability of pension systems as migrant flows tend to present younger age-structures than their receiving countries. While this argument was proposed a few decades ago and subject to discussion ever since, there have only been a few empirical studies striving to assess the role of migration in the financial sustainability of public pension systems.

Spillovers of investment in PPPs onto Portuguese public and private investment and GDP

November 17, 2017

This paper presents results of time series techniques assessing the macroeconomic impact of investment in public-private partnerships (PPPs) on public and private investment in Portugal, using data for the period 1998-2013. The approach used allows the computation of crowding-in/crowding-out effects of investment from PPPs, that is, whether investment in PPPs provides favorable spillovers for the undertaking of private and public investment or otherwise is detrimental to its development. This area of research is particularly topical because this way of financing investment witnessed a surge in Portugal in the early 2000’s.