1 Introduction to Public Sector Economics 1

Transcription

1 Tables xiii Figures xv Preface xvii Abbreviations xix 1 Introduction to Public Sector Economics 1 Introduction 1 Pareto Optimality 2 Sources of Market Failure 5 Constraints on Public Policy 10 Fiscal Instruments 11 Summary 12 2 Public Goods and Externalities 15 Introduction 15 The Public Goods Concept 15 Demand for Public Goods 17 Optimal Provision of Public Goods 19 Impure Public Goods and the Theory of Clubs 21 The Tiebout Model 23 Externalities 24 Applications to Developing Countries 28 Summary 29 v

2 vi 3 The Role of Government in Market Economies 31 Introduction 31 Libertarian Views on the Role of the State 31 The Neoclassical Role of Government 32 Government Regulation 34 The Growth and Development Role of Government 35 Government Failure 39 Government and Market-Oriented Development 41 Summary 46 4 Public Choice 47 Introduction 47 Public Choice: Definition and Scope 48 Theories of Public Choice 49 Extensions of the Public Choice Approach 59 Summary 61 5 Political Business Cycles 63 Introduction 63 Theories of the Political Business Cycle 63 Relevance of Political Business Cycles to Developing Countries 68 Summary 71 6 Public Expenditure Analysis 73 Introduction 73 Approaches to Public Expenditure Growth 73 Allocation and Control of Public Expenditure 81 Public Expenditure and Economic Growth 84 Summary 86 7 Income Distribution and Poverty Alleviation in Developing Countries 87 Introduction 87 Concept and Measurement of Income Distribution 87

3 vii Economic Development and Income Inequality 89 Measurement and Extent of Poverty 90 Policies to Alleviate Poverty and Redistribute Income 93 India s Experience with Poverty Alleviation Programmes 100 Summary Inequitable Access to Health Care in Developing Countries 105 Introduction 105 Theoretical Framework 106 The Continuing Concern with Access to Health Care 106 Cost of Access and Equity 108 Equity and the Deployment of Resources 110 Summary Introduction to Public Utility Regulation 121 Introduction 121 Nature of Public Utilities 122 Marginal Cost Pricing 122 Principles of Rate-Making 126 Summary Introduction to Cost-Benefit Analysis in Developing Countries 131 Introduction 131 Stages of Cost-Benefit Analysis 131 Evaluation of Costs and Benefits 132 Financial Decision Criteria 136 Ecological Externalities, Risk and Uncertainty 138 Summary The Budgetary Process and Budget Deficits in Developing Countries 141 Introduction 141 The Traditional Budgetary Process 141

4 viii Alternative Approaches to Budgeting 143 Structural Causes of Budget Deficits 145 Statistical Evidence on Budget Deficits and Surpluses 149 Financing the Budget Deficit 151 Balance of Payments Implications of Deficit Financing 153 Deficit Financing and the Public Debt 155 Budget Deficits and Ricardian Equivalence 156 Summary Stabilization Policy 159 Introduction 159 The Orthodox IMF Stabilization Programme 159 Structuralist Critique of the Orthodox IMF Stabilization Model 161 Importance of Fiscal and Incomes Policy 163 Selected Stabilization Experiences 165 Summary Structural Adjustment 171 Introduction 171 Characteristics of Structural Adjustment Programmes 171 Structural Adjustment Experiences 175 Summary Introduction to Taxation 183 Introduction 183 The Equity Principle 183 The Role of the Tax System 185 Taxable Capacity and Tax Effort 188 Tax Elasticity and Tax Buoyancy 190 Summary Incidence and Efficiency Costs of Taxation 193 Introduction 193 Methods of Incidence Analysis 193 Partial Equilibrium Analysis 194 Specific, Differential and Balanced Budget Incidence 195 General Equilibrium Analysis 196

5 ix Methodology of Tax Incidence Measurement 201 Incidence Studies in Developing Countries 202 Concept of Excess Burden 204 Optimal Taxation 206 Relevance of Optimal Taxation for Developing Countries 208 Summary Supply-Side Tax Policy and Tax Reform 211 Introduction 211 Supply-Side Tax Policy 212 Principles of Tax Reform 215 Selected Tax Reform Experiences Outside the Caribbean 217 The Barbadian Tax Reform 221 Summary Taxes on Income and Wealth 227 Introduction 227 The Personal Income Tax 227 The Corporation Tax 237 The Capital Gains Tax 242 The Property Tax 244 Taxes on Wealth, Transfers and Assets 245 Payroll Taxes 247 Summary Indirect Taxation in Developing Countries 249 Introduction 249 Importance of Indirect Taxes in Selected Caribbean Countries 250 Issues in Indirect Taxation 252 Import Taxes 254 Excise Taxes 257 Single-Stage Sales Taxes 259 The Value-Added Tax (VAT) 260 The Barbados VAT 263 VAT Implementation Experiences in the Caribbean 266 Colombia s Experience with the VAT 268 VAT Lessons from Developing Countries 269 Summary 270

6 x 19 Taxation of Productive Sectors in Developing Countries 271 Introduction 271 Export Taxes 271 Tourism Taxation 273 Land Taxation 274 Taxing the Financial Sector 277 Taxing the Mineral Sector 278 Summary International Taxation 283 Introduction 283 Tax Incentives for Foreign Investment 283 Tax Havens and Offshore Centres 285 Transfer Pricing and Taxation 286 Double Taxation, Withholding Taxes and Tax Treaties 287 Fiscal Harmonization 288 Scope for Fiscal Harmonization in CARICOM 292 Summary Tax Administration 297 Introduction 297 Importance and Scope of Tax Administration 298 Tax Evasion 300 Administrative and Compliance Costs of Taxation 303 Administrative Tax Reform 304 Summary 306 Notes 307

7 xi Appendix A Role of the State, Stabilization and Structural Adjustment: Selected Caribbean Countries 313 Appendix B Establishment of Public Utilities Commissions in Some Caribbean Countries 327 Appendix C Tax Reform Events in Selected Caribbean Countries 329 Appendix D Social Security Laws and Coverage in the Caribbean 335 Glossary 339 References 363 Index 387