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Title: Essays on Public Debt, Expenditure and Policy
Resulting in 1 citation.
1. Das, Kuntal Kumar
Essays on Public Debt, Expenditure and Policy
Ph.D. Dissertation, University of California - Santa Cruz, 2008. DAI-A 69/02, Aug 2008
Cohort(s): NLSY97
Publisher: ProQuest Dissertations & Theses (PQDT)
Keyword(s): Capital Sector; Children; Children, Home Environment; Computer Ownership; Computer Use/Internet Access; Current Population Survey (CPS) / CPS-Fertility Supplement; Digital Divide; Educational Returns; Financial Assistance; Government Regulation; High School Completion/Graduates; Human Capital; Public Sector

Permission to reprint the abstract has not been received from the publisher.

This dissertation is a collection of three papers that examines different aspects of public finance and policy. In particular, it looks at the choices made governments about their debt composition structure and their expenditure composition and how it affects their economic performance performance. Finally it looks at the issue of digital divide and how home computers might add to human capital formation and thus help in the economic growth of a country. The first chapter develops a theoretical model to analyze the optimal choice between bank loans and bond finance for a sovereign debtor. The model describes a market that is subject to moral hazard and adverse selection. We model the choice between the two debt instruments allowing for debt renegotiation in the event of financial distress and the possibility of default. It incorporates the possibility of private monitoring by the banks and public monitoring by the credit rating agencies. We derive the choice of debt instrument with their associated maturity structure endogenously. We find that the reduced cost of information dissemination and large crisis costs have increased the willingness of the sovereigns to get themselves publicly monitored and made it easy for the countries to participate in the bond market. The choice between bank loans and bond finance is thus determined endogenously by the trade-off between two deadweight costs: the crisis cost of a sovereign default and the cost of debtor moral hazard. In equilibrium, sovereigns use bank loans for financing short-term projects and issue long-term bonds for projects crisis costs are large.

The second chapter is an empirical analysis of public expenditure composition and economic growth. Many countries have adopted across-the-board cuts in the course of reform programs that are not desirable from the efficiency and equity perspectives, nor are they sustainable over time. For these countries, releasing resources for critical public programs and securing fiscal adjustment is absolutely necessary. We do a cross-country comparison to find out the productive and unproductive components of government expenditures and assess whether a change in the composition would have positive growth effects. We conclude that the composition-mix has different effects on growth for countries at different stages of development. There is a threshold effect for some categories of expenditure and so management of these resources is very important.

In the third chapter, we discuss issues whether eliminating the digital divide and providing home computers is a way for human capital formation for countries. Although computers are universal in the classroom, nearly twenty million children in the United States do not have computers in their homes. There is a big role of home computers in the educational protect and thus human capital formation. Home computers might be very useful for completing school assignments, but they might also represent a distraction for teenagers. We use several identification strategies and panel data from the two main U.S. datasets that include recent information on computer ownership among children--the 2000-2003 CPS Computer and Internet Use Supplements (CIUS) matched to the CPS Basic Monthly Files and the National Longitudinal Survey of Youth 1997--to explore the causal relationship between computer ownership and high school graduation and other educational outcomes. Teenagers who have access to home computers are 6 to 8 percentage points more likely to graduate from high school than teenagers who do not have home computers after controlling for individual, parental, and family characteristics. We generally find evidence of positive relationships between home computers and educational outcomes using several identification strategies, including controlling for typically unobservable home environment and extracurricular activities in the NLSY97, fixed effects models, instrumental variables and including future computer ownership and falsification tests. Home computers may increase high school graduation by reducing non-productive activities, such as truancy and crime, among children in addition to making it easier to complete school assignments.

Bibliography Citation
Das, Kuntal Kumar. Essays on Public Debt, Expenditure and Policy. Ph.D. Dissertation, University of California - Santa Cruz, 2008. DAI-A 69/02, Aug 2008.