This paper studies tax enforcement as a governance problem in which taxpayer compliance and administrative monitoring are jointly endogenous. We formalize this interaction in a two-population evolutionary game between taxpayers, who choose whether to comply or under-declare income, and authority-side enforcement units, which choose whether to inspect. Inspection is costly and imperfectly effective, and the authority side may internalize recoverable but unrecovered tax losses as an institutional-performance loss. The model identifies an interior enforcement benchmark linking tax rates, penalties, audit effectiveness, inspection costs, and institutional accountability. Under canonical replicator dynamics, this benchmark is not a stable endpoint but the center of recurrent compliance–enforcement cycles: evasion raises audit incentives, audits increase compliance, compliance weakens monitoring incentives, and weaker monitoring reopens space for evasion. Numerical illustrations show how enforcement design affects compliance, inspection, recoverable tax losses, net revenue, and institutional performance. The paper highlights that tax-governance outcomes depend not only on sanctions but also on the incentives that sustain monitoring effort over time.
This study explores the impact of fiscal decentralization on economic complexity. Economic complexity can be considered a conceptual measure of productivity levels as it represents the capacity to produce and export a diverse range of sophisticated products. I postulate that fiscal decentralization is a mechanism for efficiently allocating resources that foster productive capabilities. Using panel data for up to 74 countries from 1995 to 2020, I document a positive impact of fiscal decentralization on economic complexity. However, the impact varies across levels of economic and institutional development and tends to diminish at higher levels of decentralization. The findings strengthen calls for pro-decentralization reforms, implemented over several decades, and underscore the need for policies that support long-term effectiveness and sustainable development.
The delay, known as ‘red tape’, is common in the delivery of government goods/services, as it takes time to screen deserving applicants from non-deserving ones. Some corrupt officers exploit this delay to offer faster delivery in exchange for payment of bribes, popularly known as ‘speed-money’. In such a bureaucracy, applicants, regardless of their type, who face costly delays have an incentive to engage in collusive bribery rather than report the bribe payment. Despite this, bribery is reported in some well-known cross-country databases, even by firms that think ‘corruption is an obstacle to business’. This paper finds the conditions under which bribe reporting occurs, and a bribe-paying applicant expresses that ‘corruption is an obstacle to business’. It argues that access to the grievance redress process, its speed and accuracy, and the officers' beliefs about the probability of meeting a deserving applicant play a role in these. This paper shows that in the presence of a fast grievance redress process, a low probability of conviction of the corrupt officer, a high cost of appeal, if a low number of deserving applicants is there, the officer strategically offers such a high ‘speed money’ rate that a deserving applicant chooses to be extorted and reports a bribe. Faster delivery of goods/services also increases bribe reporting.
How does firm performance respond when firms experience an unanticipated increase in their distance from government institutions? Taking firm innovation as a central dimension of firm performance, this study examines China’s A-share listed firms from 2000 to 2020 and exploits exogenous changes in government-firm geographical distance generated by government relocations. A staggered difference-in-differences strategy is employed to identify the causal effect of increased distance on innovation. The empirical results show that greater distance from government significantly reduces the number of patents granted. The increase in distance disproportionately suppresses invention patents, which represent higher technical sophistication, while reducing overall innovation quality and elevating the probability of innovation failure. Mechanism analysis indicates that increased distance raises firms’ economic policy uncertainty, weakens their access to fiscal subsidies, tax incentives, and low-cost credit, and reduces their research and development investment, thereby intensifying financing and resource constraints. Taken together, the findings highlight the importance of institutional spatial structure in shaping firms’ technological outcomes and provide new empirical evidence on how institutional environments and spatial configurations influence technological progress within a political economy framework.
Industrial land conveyance may serve as an upstream margin of environmental accountability. We study China’s Environmental “One-Vote Veto” system, under which local officials become ineligible for promotion if mandatory SO2 reduction targets are missed, and examine how industrial land conveyance varies with this accountability pressure. Our design combines cross-city variation in target stringency with within-cycle variation in enforcement intensity to estimate within-cycle differential tightening. Tighter mandates are associated with both a smaller share and a smaller total area of industrial land conveyed to SO2-intensive industries during the high-enforcement period than during the transition period. Within this comparison, minimum investment-intensity requirements are higher, and the remaining allocations are more concentrated among larger recipients. Separate estimates indicate more positive allocation gradients toward state- or collectively controlled recipients and toward newly designated construction land, and a sharper contraction in ecologically sensitive peripheral areas. Taken together, the findings suggest that industrial land conveyance is one upstream margin through which environmental accountability may shape pollution-intensive entry.
Cum/Ex and Cum/Cum transactions have caused substantial tax revenue losses in Germany by exploiting the dividend withholding tax system. Legislative reforms in 2012 (OGAW IV), 2016 (§ 36a EStG), and 2018 (InvStRefG) aimed to eliminate these practices, yet concerns persist that modified variants may continue. This paper investigates whether these reforms effectively curtailed abusive dividend stripping by analyzing futures trading activity around 663 firm-specific ex-dividend dates of 47 HDAX companies over the period 2009–2023. Using relative abnormal open interest as a measure of trading activity and Driscoll–Kraay standard errors, the results show that each reform significantly reduced trading volume peaks around ex-dividend dates—by approximately 47
This paper develops a structural framework to assess how bureaucratic organization and institutional fit shape governance performance. The core proposition is that governance reforms do not operate on isolated indicators, but on internally connected administrative systems whose effectiveness depends on bureaucratic autonomy, professionalization, impartial implementation, regulatory capacity, and constraints on political discretion. Focusing on Uruguay, Paraguay, Panama, and Peru within a broader comparative governance space, this paper represents national governance systems as positions in a latent bureaucratic-institutional space constructed exclusively from institutional and organizational input variables. Development outcomes, such as GDP per capita, human development, inequality, schooling, and growth, are not used to define institutional distance, but are retained only as external outcomes, controls, or robustness variables. This separation allows the analysis to distinguish governance architecture from development gaps. This paper then measures institutional distance to empirically observed governance regimes and evaluates transparent counterfactual realignment scenarios toward alternative reference architectures. The resulting Expected Governance Shift summarizes the predicted change in governance performance associated with institutional realignment, conditional on each country’s initial institutional configuration. The results show substantial heterogeneity: coherent governance systems exhibit smaller but more stable adjustments, while fragmented bureaucratic configurations display larger potential gains under more demanding organizational transformation. The framework provides a quantitative tool for analyzing governance reform as a problem of institutional compatibility rather than mechanical convergence to external best practices.
This research reveals the connection between firm-level gender diversification and managers' impacts of innovation incentives on firms' business sustainability. The environment, social and governance (ESG) score is used as an indicator of business sustainability. The results show that both gender diversification and innovation incentives increase ESG performance. Compared with that of non-SOEs, the contribution of gender diversification is limited in state-owned enterprises (SOEs). This is attributed to the rigidity of the close policy following strategy. However, such strategic rigidity reduces the negative impact of agency costs when a firm experiences duality and when the general manager has excessive power. This research contributes to more than providing empirical evidence of the impact of gender diversification and innovation incentives on ESG performance. It also analyzes the heterogeneous impact of gender diversification when firm characteristics are different, which provides high policy amendment value.
Mobile money is a major component of financial digitalization and has become a key instrument for financial inclusion in developing economies. This paper examines the impact of mobile money adoption on vulnerability to climate change within a theoretical framework grounded in adaptation and resilience. We argue that mobile money affects climate vulnerability through three main economic mechanisms: risk-sharing, liquidity and financial management, and access to information. Using a panel dataset of 77 countries over the period 1995–2020, we estimate the causal effect of mobile money adoption on climate vulnerability using the entropy balancing method, which enables us to construct a synthetic control group observationally comparable to mobile money adopters. The results indicate that mobile money significantly reduces climate change vulnerability. This finding is robust across a wide range of sensitivity analyses, including additional controls, regional heterogeneity, legal origin, instrumental variable strategies, and alternative specifications. We further show that the effect is smallest in East Asia and the Pacific and more pronounced in countries with settler colonial legal origins. Finally, using an alternative measure of mobile money intensity based on a functional depth index, we confirm the robustness of our baseline conclusions. Overall, the results suggest that mobile money plays a significant role in strengthening adaptive capacity and economic resilience to climate shocks, highlighting the importance of digital financial inclusion as a policy tool for climate adaptation.
Public data openness (PDO) is increasingly viewed as a key instrument of digital governance, yet its impact on factor market governance remains unclear. This work examines whether and how PDO affects land governance using panel data for 284 Chinese cities from 2007 to 2023. Exploiting the staggered introduction of public data open platforms as a quasi-natural experiment, we employ a multi-period difference-in-differences approach. The results show that PDO significantly influences urban land governance through changes in land price variation and land supply structure. The results remain robust across alternative specifications, endogeneity checks, and tests excluding the influence of contemporaneous land policies. We further find that data quality and the disclosure of economically relevant datasets play a critical role in amplifying these effects. This work provides new evidence that digital transparency can improve the governance of traditional production factors, highlighting the role of data as an institutional mechanism shaping resource allocation.
When environmental officials are deeply embedded in local networks of relationships, strict regulation becomes difficult to sustain. This study investigates whether placing officials from outside these networks in charge of environmental departments can improve governance performance, drawing on panel data from 279 Chinese prefecture-level cities spanning 2007 to 2020. Grounded in principal-agent theory, exchanged officials, who arrive without historically formed ties to local enterprises, face less capture pressure from interest groups and are therefore better positioned to exercise regulatory authority impartially. The findings confirm that inter-regional exchange significantly improves environmental governance performance. The effect is stronger among younger officials with meaningful career advancement at stake, suggesting that relational independence and promotion motivation reinforce each other, and stronger where public environmental participation is higher, as citizen engagement helps exchanged officials identify governance gaps and sustain accountability. Exchanged officials tend to pursue stricter enforcement against polluting enterprises while also navigating budget negotiations more assertively to secure greater fiscal resources for environmental protection. The exchange effect holds even after accounting for observable differences in officials' educational backgrounds and career trajectories, suggesting that the disruption of local interest networks contributes to governance improvement independently of the individual qualities officials bring to the role. These findings speak to a broader challenge facing decentralized governance systems, namely how personnel arrangement, rather than formal regulation alone, can reshape the informal incentive environment within which officials operate.
This paper examines firm-level productivity differences among Sicilian firms characterized by varying degrees of compliance with anti-Mafia regulatory frameworks. Utilizing data from 2013 to 2021, we find that firms operating in public procurement without formal anti-Mafia certification consistently exhibit higher total factor productivity (TFP). These productivity differentials are more pronounced in provinces characterized by higher Mafia intensity and are negligible in areas with stronger institutional enforcement. The observed productivity patterns suggest potential competitive asymmetries stemming from institutional dualism: the coexistence of formal compliance frameworks and informal governance mechanisms. The analysis highlights the complex interaction between organized crime, regulatory compliance, and firm productivity, underscoring the challenges faced by regulatory frameworks in contexts characterized by weak or uneven institutional enforcement.
This study examines the interrelations among environmental technology, financial development, financial technology, governance dimensions, and ecological degradation in seven Indo-Pacific nations from 1990 to 2022, utilising panel-data methodologies including the cross-sectional autoregressive distributed lag (ARDL) model, average mean group (AMG) model, and common correlated effects mean group (CCEMG) model. The results show that technology had a substantial impact on reducing environmental degradation. Financial development, to some extent, increases carbon footprint through industrial production. Technological innovations have the potential to reduce carbon footprint significantly, provided that effective institutional governance mechanisms are in place. The results further showed mixed effects for governance. Institutional governance was a significant contributor to sustainability outcomes; an economic governance system led to increased emissions; however, political governance was not an important factor. The results suggest a policy dilemma in establishing an overarching framework to leverage environmental technologies, sustainable financing, and effective governance to achieve a rapid transition to a low-carbon economy.
We analyze the effects of product and quality differentiation on endogenous delegation under Cournot competition in a mixed duopoly. Regardless of which firm produces the high-quality product, asymmetric delegation always arises: the public firm delegates, while the private firm does not, unless the quality level of either the private or public firm is very low. However, when the quality of either firm is sufficiently low, the private firm delegates, while the public firm does not. Consequently, irrespective of which firm produces the high-quality product, social welfare and consumer surplus are higher when only the private firm hires a manager than when only the public firm does, whereas producer surplus is lower. These results remain robust even when cost asymmetry between firms is introduced.
This paper examines how lobbying shapes institutional quality and social welfare at the local level. We develop a political-economy framework in which lobbying does not directly alter government objectives but erodes institutional integrity, thereby weakening the capacity of public policy to generate welfare gains. Social welfare is modelled as a function of institutional quality, which is strengthened by public spending and undermined by lobbying pressure within a multi-level governance structure linking organization-level influence, municipal institutions, and regional well-being. Empirically, we assemble an unbalanced multi-level panel for Italy over 2011–2022, combining lobbyist-level lobbying expenditures, municipal institutional quality (MAQI), regional public spending, and regional multidimensional well-being (BES). To address endogeneity and unobserved heterogeneity across lobbyists, municipalities, regions, and time, we estimate a fixed-effects two-stage least squares model. Results show that lobbying intensity is negatively associated with institutional quality, whereas public spending is positively associated with institutional performance. Institutional quality, in turn, is positively and robustly related to social welfare, supporting an institutional mediation mechanism. Overall, the findings indicate that fiscal resources translate into welfare improvements primarily when institutional resilience is preserved, highlighting governance quality as a key determinant of welfare outcomes in decentralized systems.
Open government data, as a crucial initiative to promote leveraging the full value of data factors, is an important vehicle for improving enterprise total factor productivity (TFP). This study takes the launch of a government data platform as an exogenous shock to examine the mechanisms through which open government data affects enterprise TFP. The results show that open government data has a significant positive effect on enterprise TFP. Mechanism analysis shows that this effect is mainly realized through five mechanisms: alleviating financing constraints, promoting technological innovation, optimizing resource allocation efficiency, enhancing governance capacity, and suppressing rent-seeking behavior. Heterogeneity analysis shows that open government data has a stronger positive effect on TFP among green enterprises, enterprises with a higher level of digital transformation, and state-owned enterprises. This study not only enriches the understanding of the microeconomic consequences of open government data, but also provides micro-level empirical evidence for improving enterprise TFP.
This paper examines the intergenerational and distributional effects of debt-financed fiscal policy in South Africa, comparing immediate versus delayed fiscal consolidation. Using an Overlapping Generations (OLG) model with Markov-switching fiscal regimes calibrated to 1960–2020 South African data, we incorporate age-specific productivity, regime-dependent capital shares, and fiscal rules. Delayed fiscal consolidation reduces lifetime consumption for post-2000 cohorts by over 15
Political stability (PS) is a cornerstone of economic development, yet the role of the informal economy (IE) in shaping it remains underexplored. This study addresses this gap by examining how informal and formal economies influence PS across 124 countries from 1996 to 2020, with particular attention to income-group heterogeneity. Using the method of moments quantile regression (MMQR) alongside advanced econometric techniques, the study finds that IE systematically undermines PS while the Formal-sector macroeconomic performance (FMP) enhances PS that varies meaningfully in magnitude and direction across the PS distribution and income groups. Regulatory quality (RQ) as a moderating factor significantly mitigates the negative consequence of IE on PS. The study further identifies the heterogeneous effect of IE on PS across different country groups. On the other hand, formal-sector macroeconomic performance (FMP) and RQ substantially contribute to improving PS at the global context. However, the impact of FMP and RQ on PS varies across country groups. These findings contribute a novel distributional perspective to the literature on economic structure and governance and carry direct policy implications: reducing informal activity and strengthening institutional frameworks are not interchangeable strategies but context-dependent issue whose effectiveness depends critically on a country's development stage and baseline stability level.
This study examines how reelection incentives shape the fiscal behavior of Brazilian mayors under a binding fiscal framework. Using a regression discontinuity design on close elections between 2005 and 2020, we compare first- and second-term incumbents. We find that first-term mayors facing reelection increase both spending and revenues, largely through intergovernmental transfers. However, these effects do not occur in the electoral year. Instead, fiscal expansion is concentrated in the first three years of the mandate, with a pronounced increase in the third year. Our findings indicate that Brazil’s Fiscal Responsibility Law did not eliminate political budget cycles among reelection-seeking first-term mayors. Instead, cycles persist but deviate from the canonical pattern: rather than concentrating in the electoral year, fiscal expansion is front-loaded within the mandate, consistent with end-of-term fiscal constraints. Electoral opportunism persists, yet it is strategically anticipated to comply with legal constraints. This evidence highlights how fiscal institutions can modify the temporal structure of political incentives without fully neutralizing them.
Geopolitical tensions have increasingly emerged as an important determinant of environmental sustainability, yet empirical evidence on the geopolitical risk–environment nexus remains fragmented and inconclusive. This study examines the impact of geopolitical risk on CO₂ emissions in a panel of 24 countries over the period 1994-2020, with particular attention to distributional heterogeneity and the role of environmental policy stringency. Grounded in the STIRPAT framework, the analysis employs the System Generalized Method of Moments (System GMM) to address persistence and endogeneity and applies Method-of-Moments Quantile Regression (MMQR) to capture heterogeneous effects across the emissions distribution. The results indicate that higher geopolitical risk is associated with increased CO₂ emissions, supporting the escalation hypothesis. The quantile estimates reveal stronger effects at lower and middle emission quantiles and weaker effects at higher quantiles, indicating substantial distributional heterogeneity. Nonlinear estimates further suggest that the environmental consequences of geopolitical risk vary with the intensity of geopolitical stress. Environmental policy stringency consistently reduces emissions and serves as an important conditioning factor in the geopolitical risk–emissions relationship. Regime-based estimates show that geopolitical risk remains positively associated with emissions under low- and medium-stringency policy environments, whereas the relationship becomes statistically insignificant in high-stringency regimes. The findings highlight the importance of environmental governance, regulatory capacity and institutional resilience in shaping environmental outcomes under geopolitical uncertainty, with important implications for SDG 13 (Climate Action) and SDG 16 (Institutions).
