State Owned Enterprises and Redistribution: An Empirical Analysis

In the past decade many developing economies started to privatize their state owned enterprises. Recently, however, this process seems to have slowed down in some economies and have completely been stalled in others. Here we formalize the view that this is so because these enterprises are major instruments of income redistribution and, in economies with significant degrees of income inequality, segments of the population that benefit from this redistribution would use whatever political power they may have to oppose its abandonment. We find strong and robust empirical support for this hypothesis using cross-country data on the relative size of the state-owned-enterprise sector and different measures of inequality. We also find support for the propositions that dictatorships as well as democracies use this redistributive tool and that left-wing governments tend to redistribute more than right-wing governments through state owned enterprises.state-owned enterprises, inequality, redistribution, political economy

Intersectoral Size Differences and Migration: Kuznets Revisited

We offer a specific channel on Kuznets' hypothesis: intersectoral urban-rural size differences result in an intersectoral income inequality, increasing the national inequality; this, in turn, prompts an intersectoral migration, which works as an equilibriating mechanism, decreasing the inequality in due course. The theoretical predictions yield a recursive triangular system, in which we test, i) how the sectoral size differences influence the agricultural income, ii) how a change in agricultural income acts on migration, and iii) what happens to the income distribution as a result of migration. We find a very strong support for the theoretical predictions and the Kuznets hypothesis.Kuznets hypothesis, intersectoral size differences, inequality, migration

The impact of trade liberalization on import demand

In this paper, we empirically analyze the effects of trade reforms on import demand and derive their implications on economic development in Turkey, a country that underwent sudden and substantial trade liberalization in the mid-1980s. The tool for this analysis is the estimation of disaggregated import demand elasticities. The adoption of a more liberal trade regime as well as radical attempts to foster economic development makes the Turkish experience particularly interesting for analysis. Almost all of our elasticities are estimated to be significant, unlike those of most previous studies in the literature on other countries. We test for different elasticities over “closed” and “open” economy periods, and find that the effects of the trade reforms of the 1980s were significant for a number of industries that form the backbone of the Turkish economy. We also compare our results with elasticity estimates from past studies for developed countries

Exchange rate regimes and fiscal discipline: the role of trade openness

This study revisits the relationship between exchange rate regime (ERR) choice and fiscal discipline focusing on the role of trade openness. The conventional theoretical view is that fixed regimes bring about more fiscal discipline, while the recent literature argues that flexible regimes are more disciplinary. Empirical studies have provided mixed evidence. Using a panel dataset for a large number of developing and developed countries, as well as pooled panel OLS and instrumental variables (IV) estimation techniques, we find support for both views. We document that a fixed ERR is disciplinary at low levels of trade openness, while a flexible regime produces a greater fiscal discipline above a certain level of trade openness. Moreover, this relationship applies to only developing countries. These findings remain robust across different measures of fiscal outcomes, a number of controls, across different sub-samples, and are supported by both annual and five-year averaged panel data

A tale of two taxes: State-dependency of tax policy

In this paper, we build a simple endogenous growth model with labour and corporate taxes to investigate the asymmetric effects of tax policy over the growth trajectory. We employ a newly developed panel smooth transition model to empirically analyse a sample of 19 advanced economies over the 1961–2017 period. We find that both the asymmetric effects and the tax measures used are essential. We also find that the effects of corporate and personal taxes on long-run growth are non-linear, while the detrimental effects of personal taxes are empirically larger compared to those of corporate taxes once non-linearities are controlled for